2007
From opportunities to achievements Annual Report Report Annual
Annual Report 2007
2007 VTB Annual Report
Our Mission
JSC VTB Bank is the largest financial institution in Russia. It is the main entity of the VTB Group, a leading universal Russian banking group offering a wide range of banking products and services in Russia, the CIS, Western Europe, Africa and Asia.
Our vision
To participate in the growth of the Russian economy and the Russian corporate sector.
Our mission
VTB is a leading banking group, representing Russia in international markets and providing professional financial services.
VTB brings international experience to the contemporary Russian banking system, which promotes the success of our clients. We are proud to introduce to the world a Russia that is ready for meaningful partnership and development.
VTB strives to offer Russia’s intellectual and spiritual potential, strong character and hospitality to the world, and is building qualitatively new relationships internationally.
Our strategy
To be a leader in servicing corporate and retail clients in Russia and the first Russian banking group capable of serving its clients worldwide. 2007 VTB Annual Report
2 Statement of the Chairman of the Supervisory Council
Dear shareholders, clients and partners,
Please allow me to present VTB’s Annual Report for 2007, which summarizes the results of one of the most important periods for the Group. For the past two years we have been preparing for an initial public offering, which took place successfully in May 2007.
As one of the key players in the Russian financial system, VTB impacts not only the path of development of the banking sector, but the country’s economic system as a whole.
Based on the results of recent years we can speak with confidence of the growth of Russia’s macroeconomic stability and financial independence. The result is growing prosperity among the population, and an investment boom that has been observed over the past two years. Statement of the Chairman of the Supervisory Council
3 In 2007 disposable household income grew by for the banking sector. The rate of growth of most 10.4%. The average salary reached RUB 13,527; indicators was the highest in recent years. Banking its real growth was 16.2%. These indicators are sector assets grew by 44.1%, while the rate of capital reflected in the development of the banking sector. growth was 57.8%. Positive economic trends and rising household income led to increased activity of Russian citizens Even in this context, VTB’s success stands out. Its on financial markets. VTB was in a strong position growth significantly outstripped the market average. to meet this growing demand as witnessed by For example, VTB’s assets grew by 76.7% due mainly the positive growth in all key areas of the Bank’s to the IPO carried out this year, the largest among business. European banks in 2007.
Last year the Russian economy faced a series of VTB’s contribution to the development of the banking problems. First and foremost, the most pressing sector and the Russian economy, as a whole, problem was inflation, which was tied to a significant is increasing with every year. VTB is among the degree, to the rising prices for certain goods on leaders in virtually all spheres of financial activity, world markets. Our country, which is already highly and is one of the fastest growing banking groups integrated into the global economy, felt the effect of in the country. the negative developments in the economy. I would like to thank staff, colleagues and all our Thanks to effective delivery of its strategy, VTB clients and business partners for the part they played managed to neutralize the consequences of these in our success in 2007. The challenge is to continue trends and significantly decrease the level of to deliver in 2008. macroeconomic risks. The outcome of these efforts is VTB’s impressive results, which are reflected in this report.
The key indicators of banking activity in Russia allow Deputy Chairman of the Government us to characterize 2007 as a very successful year of the Russian Federation, Minister of Finance of the Russian Federation, and Chairman of the Supervisory Council of JSC VTB Bank
Alexey Kudrin 2007 VTB Annual Report
4 Statement of the Chairman and CEO
Dear shareholders, clients and partners,
We are pleased to present the results for 2007, which, we believe, mark a watershed for VTB. In May 2007 VTB Bank’s initial public offering took place, which was a landmark economic event for Russia and the global capital markets.
VTB Bank’s initial public offering was the second largest IPO in the world in 2007 and the largest banking IPO in Europe. During the IPO 22.5% of shares were distributed among Russian and international investors and the overall amount of equity raised was nearly USD 8 billion.
VTB Bank’s IPO was “public” in the truest sense of the word; as a result of the offering, more than 120,000 Russians became stockholders in the Bank. This is a record for the Russian stock market both in terms of the number of participating retail investors and the volume of equity raised.
Despite the instability of the Russian financial market in 2007 triggered by the crises in the global financial system, VTB demonstrated noteworthy financial stability and reliability. We are confident in the future stability of the Russian financial market and the Russian banking system and in the ability of the Russian economy to successfully withstand crises in the global market and to compensate for a downturn of the world economy.
Embarking on the initial public offering, we outlined VTB’s main development directions and strategic goals for our investors. In particular, our corporate business goals are to strengthen our leading market positions, continue to diversify and to increase our business efficiency. Statement of the Chairman and CEO
5 The objective of our retail business is to significantly 1st place among lead managers of bond issues increase turnover and market share in all product on the domestic market. At the same time, segments. VTB plans to actively develop leasing, we recognize that VTB’s investment banking business investment banking services (including asset must develop even more rapidly in the future. management), insurance and to improve its system Our main goal for the coming years is turning VTB into of corporate governance. a leader in Russian investment banking services.
The priority area for the VTB Group outside Russia Although it is a for-profit business, VTB occupies an is the CIS countries, where the Group’s goal is to active social position regarding sponsorship and become the local market leader. In Asia and Africa charity as an important part of its work and its overall VTB plans to serve clients from Russia and the CIS mission as a corporate citizen. and foreign clients doing business in Russia and the CIS and to take part in joint investment projects. In The growth in our financial results is enabling us to Western Europe the VTB Group plans to continue expand and diversify VTB’s sponsorship and charity serving Russian business and assisting Russian programs, whose key priorities remain culture, companies in accessing European capital markets. education, sports and public healthcare, as well as targeted social assistance. VTB Group has achieved considerable success since the beginning of 2007: its equity has increased by Our efforts are concentrated on taking advantage of 2.4 times and by 31 December 2007 it had reached the opportunities now arising for ensuring VTB’s long- USD 16,501 million; the size of its assets increased term growth, as well as turning Russia into one of the by 76.7% to USD 92,609 million. Consolidated net most highly developed nations in the world. profit grew in 2007 by 28.4% to USD 1,514 million. This growth occurred due primarily to the growth in In conclusion, I would like to express my recognition net interest yields and net fee revenues. to my colleagues for their professionalism, hard work and excellent team spirit. I would also like to thank For the accounting year of 2007 VTB Group achieved VTB’s shareholders, clients and partners for their excellent results in its principal spheres of activity. cooperation and wish them success and prosperity in 2008. VTB24, the cornerstone of the VTB Group’s retail business, successfully implemented social programs of the utmost importance in the sphere of mortgage loans and support for small businesses. Chairman and CEO of JSC VTB Bank As a result, the VTB Group jumped from 4th place to 3rd place on the retail credit market and increased Andrey Kostin its market share from 2.6% in 2006 to 5.9% in 2007.
In 2007 VTB’s corporate business grew faster than the market average, which allowed us to increase our market share in loans to the corporate sector from 9% in 2006 to 10.7% in 2007 and in corporate deposits from 8.7% in 2006 to 10.2% in 2007.
VTB Group also managed to strengthen market position in its investment banking business, taking 2007 VTB Annual Report
6 The VTB Group (hereinafter VTB, VTB Group and the The growth prospects and high development Group) is a leading Russian financial and banking potential of the Russian market of banking services group offering a broad range of banking products allow VTB to retain its position as a leader in all and services in Russia and the CIS, as well as in a sectors. number of countries in Western Europe, Asia and Africa. VTB is a universal banking group specializing The key component of VTB is JSC VTB Bank in corporate, retail and investment business. (hereinafter the Bank, VTB Bank), which provides services in the majority of areas of VTB’s activity. Among VTB’s competitive advantages are its broad base of corporate clients in key branches of the economy, an extensive regional sales network, a strong brand and an experienced team of managers. 7 Contents
Statement of the Chairman of the Supervisory Council 2 Statement of the Chairman and CEO 4 1. VTB Group in Figures 8 1.1. Key financial and operational indicators 8 1.2. Indicators on the Russian banking market 9 1.3. Information on the payment of dividends to shareholders of JSC VTB Bank 10 1.4. VTB Awards 2007 10 2. Overview of the Russian economy and banking sector 14 2.1. The Russian economy 14 2.2. The Russian Banking Sector 16 3. Information for Shareholders and Investors 20 3.1. Growth Dynamics of the Russian Securities Market in 2007 20 3.2. The Initial Public Offering by JSC VTB Bank 21 4. Overview of JSC VTB Bank and Other VTB Group Companies 23 4.1. Corporate History 23 4.2. Structure 27 4.3. Strategy 28 4.4. Units 33 4.5. Branch Network in Russia 43 4.6. Business Outside of Russia 45 4.7. Financial Markets Transactions 47 5. Internal Controls 49 6. Corporate Governance 60 7. Sustainable development 79 8. Summarized Consolidated Financial Statements Derived from the Audited Consolidated Financial Statements and Auditors’ Report 90 9. Summarized Financial Statements in accordance with RAS 99 10. Transactions of JSC VTB Bank 104 10.1. Major transactions of JSC VTB Bank 104 10.2. Interested-party transactions of JSC VTB Bank 104 11. Glossary 105 12. Organizational information 106 12.1. Main correspondent accounts 106 12.2. Licenses 107 12.3. Membership of non-profit organizations 108 13. Contact information 110 2007 VTB Annual Report
8 Total assets of the VTB Group, 1. VTB Group USD million in Figures 11,228 2003 17,810 2004
36,723 2005 1.1. Key financial1 and operational 52,403 2006 indicators 92,609 2007
VTB is the second largest bank in the Russian banking market in terms of the volume of its Total equity of the VTB Group, combined assets and credits and the volume of USD million equity raised, which, along with its high rate of 2,478 2003 development, serves as an excellent foundation for further growth. 2,709 2004
5,269 2005
VTB is rated the 2nd at the Russian banking market by the 6,992 2006 value of the total assets, credits and raised funds. 16,501 2007
VTB is proud of its strong tradition and corporate Total loans and advances to customers, culture. USD million
5,336 2003 Since the beginning of 2007 VTB’s assets have grown by 76.7% and at the close of 2007 10,722 2004
totaled USD 92,609 million. VTB’s asset growth 20,533 2005 is significantly outpacing the growth rate of the combined assets of the Russian banking sector, 30,235 2006
as well as that of other leading Russian banks. 60,021 2007
VTB Group has achieved this level of growth through an expansion in the volumes of its business, an increase in the range of banking products and Customer deposits, services and an expansion of its network through USD million the acquisition of banks in Russia and the CIS. 4,286 2003
6,024 2004
12,767 2005
19,988 2006
1. Data on VTB Group are presented in accordance with international 37,098 2007 accounting standards. 1. VTB Group by the Numbers
9 Performance indicators
2003 2004 2005 2006 2007 Net profit, USD million 287 208 511 1,179 1,514 ROAA 3.2% 1.5% 2.4% 2.6% 2.2% ROAE 12.3% 8.2% 17.7% 19.7% 12.3% Cost/Income 50.8% 65.2% 54.0% 50.8% 53.6%
Operational network and personnel, at year end
2006 2007 Number of branches in Russia and the CIS 778 932 Number of points of sale in Russia 506 583 Number of employees (total) 28,466 35,945 Number of employees (in Russia) 24,163 29,976
Long-term credit ratings of VTB Bank
2003 2004 2005 2006 2007 Standard and Poor’s BB BB+ BBB BBB+ BBB+ Moody’s Investors Service Ba1 Ba1 Baa2 Baa2 Baa2 Fitch Ratings BB+ BBB– BBB BBB+ BBB+
1.2. Indicators on the Russian banking market
2004 2005 2006 2007 Corporate loans 2 2 2 2 Retail loans 10 6 4 3 Corporate accounts and deposits 2 2 2 2 Retail accounts and deposits 2 2 2 2
According to its own methodology for assessing its If Rosbank is excluded from the Socie´te´ Ge´ne´rale market position and the data of the Central Bank of group, then VTB would have occupied the 3rd place the Russian Federation, VTB occupies the 3rd place on the retail loan market in 2006 and the 2nd place on the retail loan market and the 2nd place on the in 2007. market of retail deposits.
When performing the assessment, VTB experts included in their analysis the Socie´te´ Ge´ne´rale Group, which includes Bank Socie´te´ Ge´ne´rale Vostok, Rosbank, Rusfinans and DeltaCredit. 2007 VTB Annual Report
10 1.3. Information on the payment Amount of dividents paid by VTB Bank, of dividends to shareholders RUB million of JSC VTB Bank 1,600 2003 1,707 2004
1,707 2005
VTB Bank is the key component of the VTB Group. 3,439 2006 The amount of dividends paid to the Bank’s shareholders is determined by decision of the General Meeting of Shareholders of VTB Bank based on the recommendation of the Supervisory Council. The amount of VTB Bank’s charter capital did not The amount of the dividends is based on the Bank’s change as a result of this share issue and totaled net profit calculated according to Russian Accounting RUB 52,111,124,000. Standards. 1.4. VTB Awards 2007 The year 2007 was another year of VTB successful development, marked with prestigious Russian and During 2007 VTB won a number of major Russian and International awards to VTB Bank. international awards.
In April 2007 Global Finance magazine named VTB The dividends paid by the Bank for the past four years the best bank in the categories of Best Domestic Bank have ranged 13-20% of net profit. and Best Commercial Bank of 2007.
In 2006 the number of uncertified ordinary registered For the third year in a row VTB’s leading position shares in VTB Bank and the parameters of dividends in the Russian banking system, in both corporate per share changed. and investment banking and the retail market, were distinguished by awards from this acknowledged In September 2006 5,211,112,400,000 ordinary publication. shares with a par value of RUB 0.01 each were issued. These shares were floated through the In April 2007 VTB Bank received the Master of conversion of uncertified ordinary registered shares Brandbuilding award for 2007. in the bank with a par value of RUB 1,000. In the process a single share with a par value of RUB 1,000 Vasily Titov, the Bank’s Deputy CEO: “VTB’s was converted into 100,000 shares with a par value rebranding is of a strategic character, and is of RUB 0.01. a logical reflection of the current realities of the bank’s business. Now all participants in the VTB banking group are working under the same brand
2003 2004 2005 2006 Net profit, RAS, RUB millions 8,947 9,541 12,919 17,176 Dividends per ordinary share, RUB 37.98 40.5 32.75 0.00066 Amount of dividends paid, % of net profit 17.9 17.9 13.2 20.0 1. VTB Group by the Numbers
11 and under the same quality standards. I think that our I’m pleased that VTB’s activity in 2007 has won the clients will sense and appreciate these changes. Their recognition it deserves. Work with corporate clients recognition will be our main reward.” has always been a priority for the VTB Group. We intend to maintain a high standard in the future as The leadership of VTB Bank was presented with a well.” commemorative certificate by the London Stock Exchange at a ceremony in May 2007 to mark the Developed correspondent relations and accounts start of trading in global depositary receipts on the LSE. in almost any foreign currencies provides for competitive servicing of the Russian companies Nikolai Tsekhomsky, the Management Board member, and financial institutions. Head of the Bank’s Financial Department: “VTB’s entry onto the London Stock Exchange is an important event, marking the beginning of a new chapter in the In December 2007 VTB Bank received the national history of the Bank’s development. award “Company of the Year 2007” organized by VTB is the first bank to represent Russia on the RosBusinessConsulting and won the category for London Exchange. For us this is a great honor and, at “Bank of the Year.” the same time, a serious responsibility. VTB intends to do everything possible to realize its potential to Vasily Titov, the Bank’s Deputy CEO: “Despite the the fullest on international markets for the benefit of complex situation in international finance markets, its shareholders and the Russian banking sector as a VTB is one of the fastest growing banks in the world. whole.” For VTB 2007 was an extremely important year. We conducted an IPO and are continuing to drive the In July 2007 VTB Bank received Deutsche Bank AG’s business forward, while remaining open to new ideas. STP Excellence Award for USD for the quality of its We will try to live up to the trust shown by Russian processing of payments in US dollars. citizens and in the future to be worthy of the title of ‘Bank of the Year.” VTB Bank is the leading bank in the Russian Federation in the sphere of processing foreign trade operations, cooperating successfully with foreign export and import banks and insurance agencies. Its highly developed correspondent relations and accounts in practically all foreign currencies enable it to offer competitive service conditions to companies and financial institutions of Russia.
In November 2007 VTB Bank received the “Big Money” award for professional accomplishment in the financial sphere established by Itogi magazine and the Fitch international rating agency and was named “Bank of the Year in Corporate Lending.”
Andrey Kostin, the Bank CEO: “Under the prevailing conditions in today’s financial markets the advantages and shortcomings of banks working in this sector are revealed with particular clarity. 2007 VTB Annual Report
From opportunities to goals review of prospects + search for ways to attain them
2007 VTB Annual Report
14 2. Overview of the Russian economy and banking sector
2.1. The Russian economy
calculation method 2003 2004 2005 2006 2007 Macroeconomic indicators Nominal GDP (billion RUB) for the period 13,243.2 17,048.1 21,625.4 26,879.8 32,987.4 Real GDP growth for the previous period 7.3% 7.2% 6.4% 7.4% 8.1% Population (in millions) at period end 144.2 143.5 142.8 142.2 142.0 GDP per capita (RUB) for the period 91,607 118,537 151,106 188,683 232,142 Inflation by December of the previous year 12.0% 11.7% 10.9% 9.0% 11.9% Average RUB/USD exchange rate period average 30.7 28.8 28.3 27.2 25.6
Source: Data of the Russian State Statistics Committee and the Central Bank of the Russian Federation.
In 2007 economic growth continued in Russia driven Real growth of GDP of Russia compared mainly by growth in manufacturing, investments to other countries during 2003–2007, CAGR in capital assets, consumer spending and high global 7.3% Russia prices for oil. 5.8% Central and Eastern Europe
The Russian economy is one of the most rapidly 2.8% USA
developing in the world. GDP of the country has increased 2.8% United Kingdom
by 8.1% during the year. 1.9% Countries of the Eurozone
4.9% World average During the financial year the price per barrel of Urals grade oil rose by 52% to USD 88.10, while Source: Data of the Russian Central Bank and the price per barrel of Brent crude rose by 45% the IMF World Economic Outlook Database. to USD 91.31. These were both record highs. Investments in capital assets played a significant The Russian economy is one of the most rapidly role in GDP growth. In addition, manufacturing developing economies in the world. During the growth accelerated to 6.3% in 2007 compared year the country’s GDP rose by 8.1% in real terms to approximately 4% in 2006. (against 7.4% in 2006) to RUB 32,988.6 billion. Russia’s GDP has risen by an average of 7.3% a The appreciation of the rouble to the dollar year over the past five years, which significantly continued: the average exchange rate for 2007 was exceeds the global average rate for GDP growth. 25.6 roubles per dollar, having fallen by year end to 24.5 roubles.
1. According to data from the Russian Ministry of Economic Investments in capital assets rose by 21.1% Development. in 2007, which is significantly higher than 2. Overview of the Russian economy and banking sector
15 Growth of GDP, industrial production Foreign trade, and investments in fixed assets, % USD billion
6.4 2005 245 2005
4.0 125
10.9 370
54 7.4 2006
3.9 304 2006
13.7 164
8.1 2007 468
6.3 55
21.1 355 2007
223
GDP 578 Volume of industrial production 121 Investments in fixed assets
Source: Russian State Statistics Committee data. Export the growth in 2005 and 2006, which was 10.9% Import and 13.7%, respectively. Foreign trade turnover Foreign investments This sharp growth was maintained because of the Source: Data of the Russian Ministry of Economic Development. loose monetary policy. The growth of the monetary base was approximately 34%, the monetization of the economy reached 40% of GDP and gross assets noticeably in late 2007, when the banking system’s of banks exceeded 60% of GDP. In addition, the need for liquidity became especially acute. As a net inflow of capital into the country reached a new result, the surplus proved lower than the RUB 1,995 record of USD 82 billion. Direct investments from billion, or 7.5% of GDP achieved in 2006. abroad grew by 40% compared to the previous year and also set absolute records since the start A change took place in the structure of the balance of economic reform in Russia. of payments in 2007. This was the result of the relative decrease in the account balance for current Russian foreign trade continued to develop in 2007 transactions and an increase in the volume of net as a result of favorable global economic conditions. capital imports by the private sector, which was estimated at USD 82.3 billion (against USD 41 billion Russia’s foreign trade volume was USD 578.3 in 2006). billion, having risen by 23.5% compared to the same indicator for the previous year (in 2006 it rose by Russia’s gold reserves rose by 56.9% totaling 26.9%). USD 476.4 billion as at 1 January 20083. Russia consolidated its position as the third largest holder The federal budget surplus was RUB 1,782.4 billion of gold reserves. in 2007, or 5.4% of GDP2. The budget softened
2. According to data of the Russian Ministry of Economic Development. 3. According to data of the Russian Central Bank. 2007 VTB Annual Report
16 The total volume of assets in the Stabilization Fund The total volume of State debt for 2007 rose by rose in 2007 by 64% to 3,849.11 billion in rouble 5.3% to RUB 2,353.4 billion (USD 95.9 billion), equivalent (11.7% of GDP), or 156.8 billion in dollar or 7.1% of GDP. equivalent (USD 66.9 billion, 51 billion euros, 7.7 billion pounds sterling) against RUB 2,346.9 billion On the negative side, inflation rose from 9% in at the beginning of 2007. For the year RUB 1,896.3 2006 to 11.9% with benchmark inflation of 11%. billion were credited to the Stabilization Fund4. The corresponding figures a year ago were 9% and 7.7%, respectively. To a significant degree, State debt of Russia, USD billion the growth of inflation in 2007 was determined by factors connected with the increase in global 76.5 2005 food prices, structural imbalances in Russian
29.6 domestic production and the sale of food products.
106.1 Disposable income rose 10.4% in 2007 52.0 2006 compared to 8.9% and 13.3% in 2005 and 2006, 5 39.0 respectively .
91.0 45.0 2007 2.2. The Russian 50.9 Banking Sector 95.9
Over the past several years the Russian banking
Amount of foreign debt sector has grown at faster rates than the economy Amount of internal debt as a whole. The rate of growth of banks’ capital, Total debt total assets, non-financial sector loans and retail deposits exceeded the rate of growth of GDP Source: Russian Finance Ministry data. several times over, as a result of which the ratio of basic banking sector indicators to GDP grew as well. Government policy aimed at reducing Russia’s State foreign debt. The volume of State foreign debt fell to In 2006–2007 high rates of growth of USD 45 billion (RUB 1,103.3 billion) as of 1 January banking sector assets were observed 57.5% 2008, due to net repayment (repayment minus and 53.7%, respectively. The rate of capital attraction) of approximately USD 7 billion. growth for 2007 was a record 69.3% (in 2006
The volume of State domestic debt for 2007 rose by RUB 220.8 billion, or 21.5%, to RUB 1,248.9 billion, with an upper limit set by the Federal Law On The basis of the growth of banking the Federal Budget for 2007 of RUB 1,363.3 billion. sector assets in 2007 was again an Moreover, in 2007 the volume of State domestic debt expansion of lending. exceeded that of foreign debt.
4. According to data of the Ministry of Finance 5. According to data of the Russian Central Bank of the Russian Federation. and the Russian State Statistics Committee. 2. Overview of the Russian economy and banking sector
17 Indicators of the banking system, Loans and deposits, USD billion USD billion
190.1 2003 81.0 2003
27.7 10.2
4.4 47.3
257.2 2004 51.5
34.1 117.8 2004
6.4 22.3
338.8 2005 73.2
43.1 71.3
9.1 148.5 2005
533.4 2006 41.0 94.5 64.3
14.1 95.7
819.9 2007 226.6 2006
108.8 78.4
20.7 152.5 144.1
Assets 384.4 2007 Equity 121.0 Net profit 288.2 Source: Russian Central Bank data, in USD. 210.2
100 200 300 400 the figure was 49.0%). The net profit of the 7 banking sector as a whole rose in 2007 by Corporate loans 46.7% to USD 20.7 billion. Individual loans 8 Corporate deposits In 2007 the ratio of banking sector assets to Individual deposits GDP rose by 9.6 percentage points reaching Source: Russian Central Bank data, in USD. 63.5%. The ratio of banking sector capital to GDP rose to 8.3% and, thus, exceeded the 2006 level by 1.8 percentage points. The basis of the The ratio to GDP increased by 8.1 percentage growth of banking sector assets in 2007 was points to 39.2%, and the share of total again an expansion of lending. The loan portfolio volume rose by 65.7% to USD 505.4 billion. 7. Including non-bank financial institutions, financial authorities and non-budgetary funds. Bills are not included. 8. Including budgets of state non-budgetary funds, cash on settlement and current accounts of organizations, receivables, deposits of organizations and cash from factoring and forfeiting transactions. 2007 VTB Annual Report
18 Structure and breakdown of loans issued, Total banking assets and banking penetration USD billion (assets/GDP), USD billion 505.4
500
44% 190 2003 400 384.4 43% 257 2004
300 44% 339 2005
54% 533 2006 200
96.0 44% 820 2007 100 25.0 Source: Russian Central Bank data, in USD.
0 2003 2004 2005 2006 2007 the reporting period; the ratio to GDP rose by 6.8 Corporate loans percentage points (to 22.3%), and its share in Mortgage loans banking sector liabilities was 42.4%. The growth Other loans to individuals of retail deposits for the reporting period was 45.9% Total loans issued down slightly from 2006 (50.5%).
Source: Russian Central Bank data, in USD. The positive dynamics of all the main indicators of banking sector activity, both in absolute terms and banking sector assets rose from 57.2% to relative to GDP, shows how much the banking sector 61.6%9.6 is growing in relative importance in the Russian economy. The ratio of all deposits to GDP grew by 8.3 percentage points to 38.6%. This is ahead of the target set out in In terms of total banking assets per capita Russia the “Development strategy for the banking sector of leads both the CIS and BRIC (Brazil, India, China), the Russian Federation for the period ending 2008.” but is significantly behind the countries of Eastern and Western Europe.
The positive dynamics of all major indicators of the banking Nevertheless, the Russian banking system continues sector performance at the simultaneous growth of their to have a high asset concentration. The top 20 banks GDP ratio shows continuously improved significance in terms of assets account for 65.9% of the assets of the banking system. Moreover, 45.1% of all banking of the banking sector in the Russian economy. system assets are held by the top five banks with Sberbank of the Russian Federation and the VTB Group holding 25.6% and 9.9%, respectively. On the banking market corporate loans predominated, but there was nevertheless strong growth in personal lending, especially mortgages.
The main source of funding were corporate deposits and organizations. These increased by 89% over
9. Source: Russian Central Bank. 2. Overview of the Russian economy and banking sector
19 Total assets per capital, USD to a boom in equity investments, which grew by more than 20%. The high rate of investment growth continued throughout the year. 233,931 Great Britain
133,558 Germany In the second half of the year, against the background of the crisis in the international capital markets, the 137,923 Western Europe Russian Central Bank became an important source of 3,714 BRIC short-term liquidity via a series of measures aimed at overcoming the cash shortage in the banking system: 5,810 Russia for instance, it raised credit limits on one-day repo 1,715 CIS agreements and relaxed reserve requirements, etc.
11,437 Eastern Europe One of the most significant events in banking regulation in 2007 was the introduction of a new Averaged data for CIS countries include Armenia, Belarus, Georgia and Ukraine (CIS countries, in which VTB is represented). Averaged data for method for determining the effective interest rate Eastern Europe include Poland, the Czech Republic, Slovakia, Serbia, for retail loans of great strategic importance for the Croatia and Hungary. Average data for Western Europe include Belgium, development of a mature banking market. No less Denmark, Greece, Spain, France, Ireland, Italy, Holland, Austria, Portugal, Finland, Slovenia, Luxemburg, Germany and Great Britain. Data is as of the end of 2007. High banking system liquidity in the first six months of the year, active external borrowings, significant interest in the The following factors are behind the growth of the Russian assets by the foreign investors brought forward the Russian banking sector growth in recent years: boom of fixed capital expenditures, the growth of which was a favorable macroeconomic climate in the country; over 20% in the year 2007. an increase in levels of trust in banks and an increase in demand for banking services from business and, especially, retail customers; important were the passage of the Regulations On the growing diversification of banking business; the Accounting Rules for Credit Institutions and the the trend of banks to grow larger and fewer in number entry into force of the change to the Federal Law as a result of the tightening of the Russian Central “On Retail Deposit Insurance in Banks of the Russian Bank’s regulation policies and the demise of non- Federation,” which raised the level of deposit competitive banks; insurance to RUB 400,000. All of these changes an increase in the number of foreign-owned banks; reflect the general development of the Russian a continuing high rate of expansion of retail business; banking system and the gradual maturing of the further growth of mortgage and credit card business system. is expected.
The high level of liquidity of the banking system during the first half of the year, significant M&A activity by foreign banks in Russia and the significant interest of foreign investors in Russian assets led 2007 VTB Annual Report
20 3. Information for Shareholders and Investors
3.1. Growth Dynamics RTS indexes by sector
All sectors except Oil sector of the Russian Securities the oil sector 100,000 Market in 2007 14,000
After rapid growth in 2006 the Russian stock market 12,000 80,000 had a slower start to the year in 2007. Nonetheless, the growth of prices for stocks remained impressive, 10,00
at 19.9% (70.5% in 2006) and the RTS index hit 60,000 2,291 points (as of 28 December 2007). 8,000
6,000 40,000 Breakdown of RTS indexes in 2007 4,000 2,400 20,000 2,000 2,100
1,800 09.01.2007 31.01.2007 28.02.2007 30.03.2007 28.04.2007 31.05.2007 29.06.2007 31.07.2007 31.08.2007 28.09.2007 31.10.2007 30.11.2007 28.12.2007
1,500 Financial sector Telecommunication Metals
09.01.2007 31.01.2007 28.02.2007 30.03.2007 28.04.2007 31.05.2007 29.06.2007 31.07.2007 31.08.2007 28.09.2007 31.10.2007 30.11.2007 28.12.2007 Power & Utilities Source: Bloomberg. Consumer markets Oil sector In 2007 the following dynamics were observed in various sectors of the stock market (the RTS index).
Especially strong growth was observed in power The basic drivers were continuing high oil, gas and and utilities (+67.7%), metals (+55.1%), financials metals prices, as well as interest rate reductions by (+19.2), oil (+16.4%) and telecommunications the world’s leading central banks. In addition, stock (+12.9%). market growth was encouraged by the successful initial public offerings (IPO) by Russian companies In 2007 market capitalization rose by 26.4%, to RUB and banks, along with the more active role taken by 195.5 trillion compared to RUB 154.7 trillion at the regulatory bodies and the growing interest among the end of 2006. population in stock market investments. 3. Information for Shareholders and Investors
21 Capitalization of the Russian equity market in 2007, largest in the world in 2007 and the largest banking RUB billion IPO in Europe.
220,000 In 2007, as in previous years, investors favorued larger deals. The average size of an IPO/SPO transaction in 180,000 Russia, taking into account the two large placements by VTB Bank and Sberbank of the Russian Federation, was USD 1.3 billion; if these two deals are excluded 140,000 the average was USD 526 million. In countries with developing economies (not including Russia), the 100,000 average transaction size was USD 150 million.
In February 2007, Sberbank of the Russian Federation raised more than USD 8.8 billion in new capital from 09.01.2007 31.01.2007 28.02.2007 30.03.2007 28.04.2007 31.05.2007 29.06.2007 31.07.2007 31.08.2007 28.09.2007 31.10.2007 30.11.2007 28.12.2007 Russian investors. In May of the same year VTB Bank Source: Bloomberg. raised almost USD 8 billion in an IPO among Russian and international investors, which led to 22.5% of the Bank’s shares being sold. In the second half of 2007 the global “credit crunch” had a negative effect on many Russian VTB Bank’s stock offering proved to be the most stocks, particularly in the banking sector. “popular IPO” in Russia so far: more than 120,000 Russian citizens became VTB Bank stockholders. The year end was characterized by capitalization growth on the Russian stock market. The decision As a result of the stock offering, the market by outgoing Russian President Vladimir Putin to capitalization of VTB Bank, whose shares are traded publicly back Dmitry Medvedev as a presidential candidate removed much of the political risk overhanging the Russian stock market and Amount of shares placed by the Russian companies triggered a return of investor interest in the in the year 2007 is estimated in record $32.8 bn Russian market. US dollars with over $18 bn. US dollars raised during IPO at the London stock market.
3.2. The Initial Public Offering by JSC VTB Bank on the MICEX and RTS, as well as in the form of Global Depositary Receipt (GDR) on the London Stock Exchange, reached USD 35.5 billion at the time of the Characteristics of the IPO/SPO market in 2007 public offers.
The volume of stocks floated by Russian Chronology companies in 2007 reached a record USD 32.8 billion. Of this amount more than USD 18 billion On March 8, 2007 VTB Bank stopped accepting was raised on the London Stock Exchange, applications for the IPO in Russia. Applications 2 billion as a result of listings on the Russian for shares were accepted in Russia from April 9, market and the remainder through secondary 2007, in 234 branches of VTB Bank and VTB24 issues. The IPO of JSC VTB Bank was the second in more than 100 Russian cities. Both individuals 2007 VTB Annual Report
22 Amount of share placement by banks worldwide, The demand for shares of VTB Bank exceeded all USD billion expectations. The volume of retail applications totaled more than USD 1.6 billion and the number 21.9 ICBC of subscribers exceeded 130,000. 11.2 Bank of China This was more than all previous IPOs, including 8.8 Sberbank Rosneft and Sberbank. 9.2 China Construction Bank
8.0 VTB The strong demand indicates a growing awareness of the value of stock exchange investments and an appreciation of the strong and legal entities could acquire shares; the rate of growth of the banking sector, which minimum purchase was set at RUB 30,000. exceeds that of the economy as a whole.
VTB conducted a parallel IPO in London, where, Breakdown of VTB shareholders on the completion in accordance with a decision by the Federal of the global placement Financial Markets Service, the Bank was able place up to 70% additional issue of shares in the form of global depositary receipts (GDR).
The target price range for shares in VTB Bank was:
RUB 0.1130 to RUB 0.1390 per share;
USD 8.77 to USD 10.79 per GDR (at the declared price and official exchange rate set by the Central Bank of Russia for April 25, 2007 of RUB 25.7760/ USD).
The shares were priced at RUB 0.136 (USD Retail investors (4.85%) 0.00528) each, or USD 10.56 per GDR. Institutional investors (17.68%) Russian Federation (77.47%) Results of the VTB Bank IPO
IPO Characteristics Number of shares 1,513,026,109,019 Offering size USD 7,977 million Offering price RUB 0.136 (USD 0.00528) per ordinary share USD 10.56 per GDR Minimum application size for individuals RUB 30,000 Structure Listing on Russian stock exchanges: MICEX and RTS Retail placement through VTB Bank and VTB24 Listing on the London Stock Exchange: - according to rule 144A and rule S (outside of Russia) - each GDR grants the proprietary right to 2,000 ordinary shares GDR/Ordinary shares 65%/35% Joint bookrunners Citi, Goldman Sachs International, Deutsche Bank and Renaissance Capital Price range RUB 0.1130 – RUB 0.1390 per ordinary share USD 8.77 – USD 10.79 per GDR 4. Overview of JSC VTB Bank 23 and Other VTB Group Companies
4.1. Corporate History develop a universal banking group with VTB Bank at its core.
1990 — JSC VTB Bank is established by the Bank of This period of the Bank’s development is Russia in the form of a closed joint-stock company characterized by expansion beyond its traditional with State participation in its capital. The Bank was focus on providing financial services to major Russian created to service the international trading operations companies with foreign operations. The Bank offers of Russian companies. its clients and partners a full range of banking services. the 1990s — The Bank specializes in servicing large export-oriented Russian businesses, and holds the Under the financial crisis of 1998, the Bank status of a corporate bank with a limited regional network. Acquires a controlling stake in Donau-Bank was among a few Russian credit institutions which AG (presently VTB Bank (Austria) AG). continued a full-scale banking activity.
1998 — The bank is turned into an open joint- stock company, whose largest shareholder is the The next following years are characterized by dynamic Government, represented by Russian Central Bank, growth, well above the norm for major Russian and with a 99.9% stake in the Bank’s capital. European banks.
During the financial crisis the Bank is among the 2004 – present — The Bank actively develops its few Russian credit institutions to continue full- corporate business and product line, leading banking scale banking activity and to carry out, in a timely service technologies and cross-selling, and steadily fashion, all settlements and payments, both clients’ grows its share of the corporate market. transactions and its own obligations to investors and creditors. Despite the economic instability, In addition, the Bank expands its retail offerings, the Bank maintains its financial solvency: payments now one of its priorities. The Bank continues to on forward contracts with foreign banks were develop as the foundation of a major international made in full, syndicated loans and loans raised on financial group and completes a series of significant international financial markets were paid off. To a acquisitions of banking assets in Russia and abroad: significant degree, this strengthened the Bank’s position on the Russian market of banking 2004 — the Bank acquires a controlling stake services. (85.81%) in the CJSC KB Guta-Bank, which at that time had a liquidity problem and was experiencing 2002 — the Bank’s shares are transferred to the serious financial difficulties. On the foundation of Ministry of Property Relations of the Russian Guta-Bank, a specialized retail bank, VTB24, was Federation. A new management team is appointed, created, focusing on serving and providing credit including Andrey Kostin, currently the Bank’s for retail customers and small businesses as Chairman and CEO; the Bank adopted a strategy to a part of VTB. 2007 VTB Annual Report
From goals to objectives wide experience + progressive ideas
2007 VTB Annual Report
26 2005 — the Bank becomes the owner of 75% +3 Vneshtorgbank (Ukraine) with VTB Bank (Ukraine). As shares in JSC Bank of Industry and Construction. part of the restructuring of the business of European subsidiaries, stakes in VTB Bank (Germany) and 2004–2006 — the Bank acquires a controlling VTB Bank (France) are transferred from VTB Bank stake in United Georgian Bank (Georgia) and CJSC (Europe) to VTB Bank (Austria), which serves as Armsberbank (Armenia), creates a wholly-owned the core of a banking sub-group, with the goal of Ukrainian subsidiary, CJSC Vneshtorgbank (Ukraine), developing corporate business in Europe. A share and acquires 98.5% of AKB Mriya. of VTB’s participation in East-West United Bank S.A. (Luxemburg) is sold. 2005 — the Bank acquires the Russian Central Bank’s interests in Moscow Narodny Bank in London [now VTB Bank (Europe)], the Commercial Bank for Northern Europe-Eurobank [VTB Bank (France)], Ost- West Handelsbank AG, Frankfurt am Main [VTB Bank (Germany)].
2006 — the Bank begins operations in Asia and Africa and creates a joint bank in Vietnam in partnership with the state Bank for Investments and Development of Vietnam, a bank in Angola and a financial company in Namibia.
End of 2006 — the banks and companies that make up VTB are rebranded, following which the names of the majority of the Group’s financial institutions contain the abbreviation “VTB” and an indication of the country, in which they are represented, or their line of business. Interests in VTB Bank (Germany) and VTB Bank (France) are transferred to VTB Bank (Europe).
IPO of VTB bank was the key event of the year 2007. The Russian and International companies and over 120 thousands of private investors became the owners of 22.5% of shares.
2007 — the key event of the year is the IPO of VTB Bank. Russian and international investment companies, as well as more than 120,000 private investors, become the owners of 22.5% of VTB Bank. A controlling stake is acquired in CJSC Slavneftebank in the Republic of Belarus; VTB’s subsidiaries in Ukraine are reorganized by merging CJSC 4. Overview of JSC VTB Bank and Other VTB Group Companies
4.2. Structure 27
VTB Group1
Russia Europe CIS Asia / Africa2
VTB Bank VTB Bank Europe VTB Bank Ukraine VTB Representative Office in India VTB24 VTB Bank Austria Bank VTB Armenia VTB Representative Office in China VTB Bank North-West VTB Bank France VTB Bank Georgia VTB Bank Europe VTB-Leasing VTB Bank Germany Bank VTB Belarus Branch in Singapore3 VTB Insurance Russian Commercial Bank (Cyprus) VTB Representative Office in VTB Capital (Namibia) Russian Commercial Bank AG Kyrgyzstan VTB Bank Africa (Angola) (Switzerland) VTB Representative Office in Italy
1. The structure of the VTB Group as of December 31, 2007. 2. The Asia/Africa region was not a distinct geographical segment in 2007. 3. Consolidated on the basis of VTB Bank (Europe).
The creation of VTB began on October 17, 1990 with In early 2008 VTB branches were opened in the establishment of the Bank of Foreign Trade of the China (Shanghai), India (New Delhi), as well as a Russian Federation. representative office in Kazakhstan. A joint venture bank was created in Vietnam and an affiliate of VTB As a result of organic growth and a series of major Bank (Europe) is now operating in Singapore. acquisitions, VTB Group has become a universal financial and banking group with a strong presence As a result of organic growth and a number in Russia and in a series of countries in the CIS, Western Europe, Africa and Asia. of acquisitions, VTB was transformed into a universal financial banking group. Despite its broad geographical reach, the cornerstone of VTB is its banking business in Russia. As of the end of 2007 VTB’s sales network of banking products and services comprised 583 points of sale.
VTB Group consists of two subsidiaries in Russia, one each in Ukraine, Armenia, Georgia and Belarus; six subsidiaries in Western Europe (Great Britain, France, Austria, Germany, Cyprus and Switzerland), one in Angola and a financial company in Namibia. VTB Bank has a representative office in Italy and China. 2007 VTB Annual Report
28 4.3. Strategy in the Northwestern Federal District and the city of Kirov. The retail business of VTB Bank North-West The VTB Group’s main goal is to increase shareholder will be gradually transferred to VTB24 Bank, while its value. To achieve this goal VTB Group: corporate business outside the Northwestern Federal District will be transferred to VTB Bank. strives to be the leader in serving corporate and retail clients in Russia and the CIS, making use of 2. VTB Group’s second priority region is the CIS, its competitive advantages in terms of its skill in where VTB is actively expanding its presence, assessing and willingness to accept, the risks of its acquiring and opening new banks. By 2010 Russian clients, its work experience in developing VTB Group will have branches in all countries markets and its ability to carry out exclusive deals for of the CIS that meet our investment criteria. its major corporate clients and make use of a wide In these countries VTB Group will develop universal network of regional branches; banks. Their functions will include serving local and international corporate clients and actively seeks to capitalize on its unique position as the developing retail business on the basis of the leading Russian financial group to offer its services experience and the technologies of VTB24 Bank. to clients in the CIS, Europe, Asia and Africa; In addition to banking services, other financial services will be developed in CIS markets, including strives to increase the efficiency of each of its leasing. The objective is that VTB Group will be one divisions and of VTB Group as a whole. of the leading players in each of the CIS markets.
VTB Group views the current crisis in the global 3. The third priority for VTB Group in the medium-term financial markets as a unique opportunity to is emerging markets – first and foremost, nations strengthen its position in key regions and client in Asia and Africa. In these markets, VTB plans to segments: service clients from Russia and the CIS and foreign clients conducting business with Russia and the CIS 1. VTB Group’s priority is Russia. In Russia VTB’s and to take part in joint investment projects. objective is to grow faster than the market as a whole, while increasing its profitability. In order to deliver this VTB Group plans to: In Western Europe VTB Group plans to continue the policy of the Russian strengthen VTB Bank’s leading position in serving business servicing and providing support major corporate clients and financial institutions; to the Russian companies in their foreign rapidly diversify its portfolio and develop its business expansion and operation at the European with small and medium-sized businesses; establish VTB24 Bank as the leading player in the capital markets. retail market, particularly in lending. The share of retail business in the overall business of VTB Group grew significantly in 2007 and will continue to grow; 4. In Western Europe VTB Group plans to continue actively develop its investment banking business its policy of serving Russian business and with the aim of occupying a leading position in the supporting Russian companies in their foreign Russian market in the medium term. The key centers expansion and on the European capital markets. for investment banking services will be Moscow and Affiliated banks will be specialized: corporate London as VTB Bank (Europe); business will be consolidated in VTB Bank (Austria), optimize the business of VTB Bank North-West while VTB Bank (Europe) will concentrate on through specializing in serving corporate business investment banking services. 4. Overview of JSC VTB Bank and Other VTB Group Companies
29 To achieve its strategic goals, VTB Group plans to: services to existing clients, using the potential of the foreign banks of VTB Group and affiliated financial grow at a rate faster than the Russian market and companies; increase its share of both corporate and retail focusing on serving medium-sized businesses; business; further improving customer service and simplifying actively develop its investment banking business and decision-making processes; attain a leading position in investment banking; further integrating VTB Bank North-West into the VTB increase and diversify its business by proactively Group, through its specialization in corporate business developing mid-sized and small business and in the Northwestern Federal District (NWFO) and the making retail a larger part of the Bank’s business; gradual transfer of corporate business outside the NWFO ensure the business is profitable by maintaining the to VTB Bank. current net interest margin and significantly increasing commission income; Increasing business efficiency will allow VTB Bank to lessen its dependence on the capital markets and maintain its leading position in the corporate sector. increase the share of client deposits in total liabilities; Improving lending procedures and risk management further develop associated financial services – systems, along with better operational processes and leasing, asset management and insurance; technologies, will allow the Bank to become significantly continue to actively develop the VTB Group’s more efficient and lower its costs. foreign business, including entry into new markets in CIS countries; increase the retail business in CIS Retail Business countries; complete the integration of VTB Group banks in Russia VTB24 is the channel through which the Group is and Europe; developing its retail business. VTB’s key goals are rapid improve the systems of corporate governance. growth in volume and an increase in market share in retail banking services for all main products, as well as Corporate Business to increase the profitability of the credit portfolio and to grow commission income. VTB aims to strengthen its leading position in the Russian corporate banking market. VTB Group intends The goal of VTB Group in Russia is to achieve second to achieve this goal by: place in terms of consumer lending and to maintain its leading position in terms of the size of retail deposits. expanding its offerings and creating the best product VTB’s target client segments are high-net-worth clients, range on the market; middle-class clients and small businesses. providing integrated long-term relations with clients and increasing cross-selling of supplementary One of the priorities in the retail banking business is products and services including investment banking actively expanding the VTB24 retail network, completing the migration of the retail business of VTB Bank and VTB Average annual growth of assets in 2005–2007 Bank North-West to VTB24 and ensuring VTB24 has a according to RAS, % presence in all Russian cities with a population above 150,000. 75.0% VTB Group in Russia To reach these goals VTB Group is taking a series of 36.8% Sberbank measures; among these, the highest priorities are: 47.7% Banking system in Russia offering a full range of banking products and services to Source: Russian Central Bank. retail and small-business customers; 2007 VTB Annual Report
30 providing all VTB Group products to retail clients VTB’s Business outside Russia through the VTB24 network: insurance, retirement coverage and asset management; The development of VTB’s business outside providing premium financial services to high-net- Russia will contribute to the Group’s strategic worth clients in Moscow and other Russian cities; goals: to become a significant player in other CIS raising sales efficiency and improving the quality of markets and to be able to offer its clients services customer service; throughout the world. gradually transferring VTB Bank North-West’s retail business to VTB24. VTB plans to further develop its international presence with the goal of integrated service for Another of VTB Group’s priorities is to develop corporate clients in Russia and the CIS, as well as its retail business in other CIS countries through businesses in economic partnership with Russia existing banks banks currently being acquired, and other CIS countries. or newly created banks, by making use of the experience, processes and technologies of VTB24, VTB believes that the CIS countries present great and also to expand the network significantly opportunities for business development. in Ukraine and Belarus. In connection with this, VTB has identified the CIS countries as its priority international region. Investment Business VTB Group intends to expand its presence both VTB views its investment business as its most through the organic growth of existing affiliated promising activity with corporate clients and aims banks and through the acquisition of local banks to strengthen its position significantly in this or the creation of new banks in countries, where segment by partnering with VTB’s extensive base a presence is deemed economically beneficial. of major corporate clients. The VTB Group has a presence in Ukraine, Belarus, To achieve its goal of occupying a leading Georgia and Armenia, where a significant number position on the Russian investment-banking of banking institutions already exist, as well as market VTB will: in Kazakhstan, Azerbaijan, Kyrgyzstan, Moldova and Uzbekistan. VTB views these countries as form a professional team of specialists with priorities. experience in leading international investment companies and banks, including those in Great VTB has set its objectives for its CIS branches Britain, the USA and Russia; to become leaders in their local markets and to create a separate legal structure for the investment sell banking services to both Russian companies business with headquarters in Moscow and a conducting business in the CIS and to local major office in London [on the basis of VTB Bank corporate clients. Another key area of focus is (Europe)]; building and developing the retail business. establish partnerships with the main buyers of Russian risk – major retirement funds, mutual VTB Group has a presence in Western Europe as funds, and hedge funds of the USA, Western well, in Great Britain, France, Austria, Germany, Europe, Asia and the Middle East; Cyprus and Switzerland. VTB is continuing to create a research capability that ranks among the optimize the activity of its subsidiaries in Western top three in the market in macroeconomics and to Europe. The Group intends to consolidate its the industry sectors, which will enable it to generate corporate business in Europe under VTB Austria, investment ideas. while our London location [VTB Bank (Europe)] 4. Overview of JSC VTB Bank and Other VTB Group Companies
31 will be used to develop the Group’s investment consolidate the Group’s analytical information; banking business. centralizing and consolidating IT systems and operational support for increased efficiency and the With the aim of developing and optimizing the creation of integrated IT solutions for VTB Group’s management of its corporate business in Europe banks in Russia; under VTB Bank (Austria), a banking sub-group has building a unified, integrated customer relationship been created that includes VTB Bank (Germany) management (CRM) system, which will facilitate a and VTB Bank (France). In VTB Bank (Europe) a centralization of customer information, enabling the reorganization process has begun as we build our bank to have a holistic view of customer needs. investment business. VTB aims to gradually introduce a unified, centralized VTB is also planning the development of services automatic banking system (ABS) for the parent for corporate clients in several countries of Asia and organization and the branches within VTB Bank. It Africa, with which Russia will carry out joint projects is also planned to migrate VTB24 onto this system, and cooperate in foreign trade operations. which will equip it to handle increased customer volumes. Operating Efficiency Other Financial Services of VTB Increasing VTB’s operating efficiency and profitability is a key goal. In order to deliver value to our investors The strategy of VTB-Leasing in Russia calls for further VTB is taking measures to integrate and strengthen aggressive growth maintaining a leading position the control and coordination of the activity of all the banks and financial companies in the Group. To meet the market and investor expectations, VTB Group intends to continue to optimize its VTB implements measures for integration, strengthening organizational structure in order to increase of control and coordination of activities of all banks operational efficiency across all its businesses in and financial companies within the Group. every geographic region.
In order to increase the efficiency of cooperation in the Russian market, branch diversification, the between branches of VTB Bank and its affiliated growth of branches’ share in the portfolio and the companies VTB created the Management Committee development of business in the CIS. of VTB Group in 2006. Its activity will be focused on ensuring the efficient development of VTB Group and This will be achieved by: the maximum use of its competitive advantages, optimizing internal processes with the aim of the development of the product line for targeted identifying and applying the Group’s best practice segments; and extracting the maximum impact from the expansion of the sales network: the opening of the integrated use of resources. VTB-Leasing branches in Russia (under VTB or VTB24 branches); the growth of regional portfolios; Information Technologies the introduction of a unified, centralized IT system; the opening of subsidiaries in the CIS. VTB will continue to develop its IT systems to support the growing volume of business. This includes: VTB Group also plans to actively develop its Asset Management capability. The Group’s plans include creating a corporate data repository to store and the development of a full range of products from 2007 VTB Annual Report
32 mutual funds and trust management for introducing the position of Corporate Secretary, high-income private clients to fund management the development and adoption of a Resolution on for companies. the Corporate Secretary; increasing transparency – relations with the media, VTB Group has purchased a holding in the insurance supervisory and regulatory bodies, investors and company VTB-Rosno and has renamed it VTB stockholders, employees and other stakeholders Insurance to independently develop its insurance concerning questions on the corporate governance business. The strategic goal of VTB Insurance is of the Bank and the VTB Group; increasing its market share in terms of insurance improving the corporate website in Russian and premiums and developing its customer base in the English (www.vtb.ru and www.vtb.com, respectively). market.
Other key developments in 2007 include VTB’s entry into the factoring market and the launch of the VTB Private Retirement Fund.
Corporate Governance
The Group views the formation of a system of corporate governance that is in keeping with the best global practices as a prerequisite for effective development, an increase in transparency and the development of its internal control system.
Formation of the corporate management system employing the best world practices is considered as a mandatory condition of efficient development by the Group.
The following priorities have been set for improving the corporate governance system:
adopting a series of documents addressing corporate governance issues: a Code of Corporate Conduct, Ethics Code, Dividend Policy, Regulations on Information Policy and Regulations for Responding to Stockholder Complaints and Inquiries; creating a Nomination and Remuneration Committee of the Supervisory Council, as well as considering the creation of a Strategic Planning Committee and a Risk Management Committee; 4. Overview of JSC VTB Bank and Other VTB Group Companies
4.4. Business Units 33
Business units of the VTB Group
Retail business Corporate business Investment business
Loans Loans to large and medium-sized Debt capital to individuals business business
Consumer loans Servicing foreign economic, trade Project financing and investment activity
Mortgage loans M&A financing and advisory Documentary business services Car loans (including letters of credit)
Guaranty business Credit cards Asset management
Currency control Small business loans
Financing of clients' foreign-trade Deposits and settlement operations services
Deposit and settlement services
Sindicated loans
Safe-deposit services for clients
Leasing
Factoring 2007 VTB Annual Report
34 Corporate Business VTB has 2,400 large clients (those with earnings in excess of RUB 2 billion). The majority of them are At VTB Group corporate business is understood as part of large financial and industrial groups. the servicing of large and medium-sized corporate clients excluding the small business segment and In 2007 VTB Group grew faster than the corporate investment banking services. Companies with a segment of the market and increased its market share turnover of over RUB 2 billion are considered to be in Russia: large clients while medium-sized clients are those with a turnover of between RUB 90 million and RUB market share in loans grew from 9.0% in 2006 2 billion. Companies with a turnover of less than RUB to 10.7% in 2007; 90 million are placed in the small business segment, market share in corporate assets grew from 8.7% and are covered by retail services. in 2006 to 10.2% in 2007.
The subdivisions of VTB’s corporate units offer an extensive list of banking services and products Corporate loans breakdown, to large and medium-sized companies, financial USD million institutions and government organizations, serving the key sectors of the Russian economy. 50,000
VTB Group has nearly tripled the number of its large 12,020 and medium-sized corporate clients since 2004. 40,000
Corporate deposits, 7,142 USD million 30,000 27,000 5,316
5,170 22,000 5,049 20,000 4,790 17,000 16,781 4,184
3,000 4,067 12,000 10,000 2,402 2,364 22,691 1,605 6,290 7,000 11,432 8,491 3,148 9,634 6,372 4,437 2005 2006 2007 2,000 2005 2006 2007
Finance Trade and commerce Current deposits Manufacturing Term deposits Building construction Source: Consolidated IFRS financial statements of VTB Group for 2007. Other sectors 4. Overview of JSC VTB Bank and Other VTB Group Companies
35 Competitive Advantages service of settlements related to foreign-trade operations, including currency control, conversion VTB’s strengths in the corporate business segment operations; are: transactions involving clients’ debt securities; offering services to clients’ employees (for example, a broad product range; payroll plans, loans). an effective customer service model; a differentiated approach to different customer Plans for 2008: segments; broad expertise and good understanding of the expanding the line of corporate and treasury services; nature of Russian risks; increasing cross-selling; the ability to structure complex individual deals; improving the service model for targeted customer integrated service (bundling of leasing services, segments, including large regional companies; investment banking products, payroll plans and improving business processes and the system of pricing products for our clients’ employees from VTB24, for credit products. insurance products from VTB Insurance); a wide network that includes affiliated banks abroad; In the year 2007 VTB Group managed to resolve the major strong balance sheet and access to funds; the ability to offer long-term credits (5-7 years). task of the corporate segment – to exceed the market growth rate and increase the market share in Russia. Services for Clients in the Large Business Category Main Clients In 2007 VTB Bank significantly expanded its range of products for corporate clients and began to offer Among the bank’s major clients are such companies the services of VTB’s European banks to Russian as the AvtoVAZ Group, Rosoboronexport, JSC Sukhoi, JSC customers. Traditional products offered by VTB Bank Sovkomflot, the Aeroflot Group, JSC Russian Railways, include: JSC Moscow Metrostroi, JSC Roszheldorstroi, the MOST Group, OMZ (Uralmash-Izhora Group), and many others. deposits; credit products: Services for Clients in the Medium-Sized – short-term financing of current activity of business Business Category of corresponding branches (loans/credit lines, including those with debt and withdrawal limits, Banking service for medium-sized businesses within the security-free loans); framework of the Group is provided by VTB Bank; in the – loans in the form of overdrafts; Northwestern Federal District and in the city of Kirov – – long-term loans for the financing of investment by VTB Bank North-West. expenses; – reverse stock repurchase agreements; Main Products and Services – financing deliveries of imported equipment, raising financing from foreign banks for the modernization VTB Bank offers its medium-sized business clients the of production; most competitive list of credit services on the market, – leasing; allowing us to provide for current business needs – factoring; in financing trade transactions, increasing working trade finance: guarantees and bills of credit; capital, production and also clients’ short-term cash integrated cash services; requirements. 2007 VTB Annual Report
36 Major deals in 2007
Client Amount Deal JSC AvtoVAZ RUB 6 billion Corporate loan Volga-Dnepr Group USD 80 million Servicing financing through VTB Bank (Europe) JSC Terminal USD 173 million Financing for the construction of the Sheremetyevo-3 airport complex JSC FESCO Transport Group USD 120 million Reverse repurchase agreement with shares CJSC Sukhoi Civil Aircraft EUR 50 million Standby letter of credit for the European Bank of Reconstruction and Development for a loan offered for the completion of the development, certification testing and production of the airplane of the SSJ family (Sukhoi Super Jet)
In 2005 VTB Bank introduced a completely new As of the end of 2007 the number of VTB Bank had service model for corporate clients in the medium- 22,200 medium-sized business clients. sized business category, which allowed us to eliminate redundant functions of the head office and Plans for 2008 branches involving standard transactions. A tool for assessing credit risk was developed for medium- VTB’s main task in 2008 is to ensure dynamic growth sized customers, which has allowed us to offer in sales to clients in the medium-sized regional clients a wide spectrum of banking products and business category. To achieve this VTB Bank plans to: services, including carrying out complex structured transactions. significantly expand the products offered by the Bank; Achievements in the Medium-Sized Segment improve methods for analyzing the credit risk in Regions of medium-sized clients; improve our collateral policies. Applying improved methods for the sale of credit products and risk assessment, the development Corporate Services for Banks of client subdivisions for work with medium-sized business and adaptation of the employee incentive The main products offered by VTB Bank to credit system to specific goals allow us not only to meet organizations are: our targets, but also to grow faster than the Russian banking market as a whole. Thus, in 2007 loans cash services; made to medium-sized business clients nearly interbank loans; doubled. Over the same period the volume of the trade and structured finance; Russian banking market grew by 50%. depositary service;
Major Transactions in 2007
Client Amount Deal OJSC Lisko Broiler, Voronezh RUB 1.9 billion Construction and outfitting of processing plants OJSC RDC-Samara, Samara RUB 900 million Financing to upgrade fixed assets, over a period of up to 5 years FON Group, Kazan, Tatarstan RUB 580 million Financing for housing construction OJSC Orenburg Drilling Company, Orenburg USD 20 million Raising international financing for capital investments 4. Overview of JSC VTB Bank and Other VTB Group Companies
37 investment services (organizing the issue of debt Retail Business securities, syndicated loans, broker services). The VTB Group is one of the leaders in retail banking By the end of 2007 the Bank’s correspondent services in Russia. network comprised close to two thousand banks, which allows us to fully provide for the business In less than a year, through its retail business needs of both clients and the Bank’s own VTB24, the bank launched a full range of retail business. lending, deposit and cash services products, and implemented up-to-date technologies for serving In the context of working to ensure that the Bank retail customers. fulfills the functions of one of the main transfer banks in Russia, the Bank began to open Russian In August 2005 VTB Group began migrating retail rouble accounts for non-resident banks (including customers and small business clients to VTB24. The banks of CIS countries). As of the end of the acquisition in December 2005 of a controlling stake year the Bank opened approximately 130 such in VTB Bank North-West (formerly JSC Promyshlenno- accounts. In the second half of 2007 the Bank stroitelny bank, or PSB) allowed VTB to expand its began to offer non-resident banks overdraft loans presence on the retail banking services market in the for rouble accounts. Northwestern district.
In 2007 VTB Group organized more than 50 The migration of retail business is expected to be syndicated loans totaling USD 2.5 billion. VTB completed in 2008. Bank is one of the most active players in the rouble syndication market, a segment that is relatively At the close of 2007 more than 2 million retail clients new for the interbank market. A landmark deal and approximately 200,000 small-business clients involved the Belarusian JSC Belagroprombank, were served by the VTB Group. As of December 31, as the first syndicated loan in roubles organized 2007 VTB Group also served approximately 450,000 for a non-resident bank and was recognized as retail clients and 30,000 small-business clients in the “Transaction of the Year” by the authoritative Ukraine, Georgia and Armenia. international publication Trade Finance Review. VTB Group made a breakthrough in the development The overall fiduciary limits set by foreign and of retail banking services, having increased its market Russian financial establishments for the Bank rose share from 2.6% in 2006 to 5.9% in 2007 and risen in 2007 by USD 2.8 billion to approximately USD from fourth to third place in consumer lending in 2007. 15 billion, including approximately USD 4 billion by Russian banks and approximately USD 11 billion VTB Group is firmly maintaining its position in the 2nd by foreign banks. place in retail deposits with a significant market share that rose based on 2007 results to 4.8%.
Region Number of New Correspondent Overall Number of Banks in 2007 Correspondent Banks Foreign countries, CIS and beyond 39 1,390
Russian Federation 17 560
Total 56 1,950 2007 VTB Annual Report
38 VTB Group retail deposits market share VTB continues to grow its small business loan in Russia, % portfolio (businesses with annual sales up to RUB 90 million), showing consistently high and stable growth in lending volumes.
According to the Russian Central Bank, at the close of 2007 VTB controlled the second-largest retail sales network in Russia.
Competitive Advantages
The significant achievements in the retail business segment in 2007 were made possible by the accelerated creation of a retail sales network (165
Sberbank (51.2%) new retail points were opened), an expansion of the VTB Group (4.8%) product line, the introduction of new products, the Bank of Moscow (2.4%) strengthening of the positions of the VTB and VTB24 Raiffeisenbank (1.9%) brands in Russia, improvements to service quality, Socie´te´ Gene´rale´ Group (1.7%) and the launch of a quality control program for Other (38%) customer service.
Main Products and Services
VTB Group retail loans market share VTB’s retail customers can take advantage of a long in Russia, % list of banking products and services from VTB24.
Deposits. VTB Group offers its retail customers a wide range of retail deposits, as well as promissory notes denominated in six currencies, registered deposit certificates and bearer deposit certificates.
Mortgage lending. Today, mortgage lending is one of the priority focus areas of VTB. By increasing the availability of home loans VTB is fulfilling an important social as well as economic need.
VTB24 offers a wide range of residential mortgage
Sberbank (31.9%) products. Socie´te´ Gene´rale´ Group (6.0%) VTB Group (5.9%) In 2007 VTB24 significantly updated its lending Russian Standard (4.5%) terms and optimized its mortgage lending Bank of Moscow (2.3%) technology. Other (49.3%) VTB24 controls a significant share of the Russian
Source: VTB analysis. Socie´te´ Ge´ne´rale Group figures include the figures mortgage lending market: 14.4% in 2007. In the of Socie´te´ Ge´ne´rale Vostok, Rosbank, Rusfinans, and DeltaCredit. Moscow region VTB24 is the clear leader 4. Overview of JSC VTB Bank and Other VTB Group Companies
39 Loans to individuals, Deposits of individuals, USD million USD million
8,000 12,000
7,000 10,000
6,000 8,000 3,247
5,000 6,000 7,709
4,000 4,000 5,549 774
3,000 2,000 2,974 1,777 2,000 0 1,475 3,661 2006 2007
1,000 106 Current deposits 952 Term deposits 0 2006 2007 Source: Consolidated IFRS financial statements of VTB Group Consumer loans and other for 2007. Car loans Mortgages Banking Cards. As of December 31, 2007 VTB24 had Source: Consolidated IFRS financial statements of VTB Group issued more than 4 million banking cards, of which for 2007. more than 570,000 were credit cards. in mortgage lending with a market share of more VTB24 offers its cardholders a high level of services, than 23%. advantageous financial conditions and innovative credit products. The selection of credit and debit In 2007 VTB Group issued mortgage loans to cards issued by VTB24 includes cards, which employ totaling USD 3.661 billion. At the end of 2007 the the VISA International, MasterCard World Wide and average mortgage loan issued was USD 90,360 Diner’s Club payment systems. significantly larger than the market average. Service for High-Net-Worth Customers . In 2007 Consumer Lending. VTB24 offers retail customers VTB24’s business of servicing high-net-worth secured retail loans of up to USD 100 thousand (or clients was split off into a separate area of focus euros) or RUB 3 million, as well as unsecured retail and ambitious plans were made to develop this loans of up to USD 25 thousand (or euros) or RUB line of business. Special attention was paid to 750,000. Retail loans issued in 2007 averaged USD the development and introduction of a systematic 7,800. approach to high-net-worth services, to the creation of service platforms, quality control and relationships Car Loans. VTB24 offers loans for the purchase with clients. of new and used foreign cars and for new Russian-manufactured cars in roubles, By the end of 2008 VTB24 plans to increase its US dollars and euros. number of HNW clients and is therefore planning 2007 VTB Annual Report
40 to open “premium” offices in Moscow and St. service, one of VTB’s priorities is the development Petersburg, introduce new standards for HNW of alternative sales channels, such as ATM networks services in the regions, expand its package and telephone and Internet banking (the “Telebank” of international services and comfort services system). and offerings connected with asset protection, maintenance and inheritance. Plans for 2008
Small Business Services. In 2007 the sales of Among the main goals in the coming year is a focus the small business lending unit grew rapidly. on increasing market share for all products, growing
The biggest contribution to the development of small In the year 2007 VTB24 made a business lending was made by the Moscow region (including Moscow and the Moscow oblast), St. significant improvement of lending Petersburg and the Leningrad oblast and the regions conditions with an optimized mortgage of Tomsk, Belgorod, Yaroslavl and Altai, along with lending technology. several others.
Over the course of 2007 VTB24 signed partnership the retail business a rate above that of the market as agreements with 27 Russian regions on small a whole, creating innovative products, developing business support. An active partnership is now technologies, increasing the share of fees and in place with the Small Business Credit Assistance commissions, improving the existing sales system Fund of the city of Moscow. and making active use of the VTB24 network for sales of insurance products by VTB Insurance and VTB Retail Client Services Sales Network Asset Management.
In the past year VTB Group has continued to In 2008 VTB plans to complete the migration of its expand its VTB24 regional retail sales network, retail business from VTB Bank and VTB Bank North- which consisted of 328 points by the end of 2007. West to VTB24. The network created by the bank covers all the main regions of Russia, and VTB24’s services are VTB’s plans include a further increase in the number accessible to customers in 140 cities. of retail points of sale. By the end of 2008 178 new retail points will be opened including the migration Alongside the introduction of new products, greater to VTB24 from VTB Bank and VTB Bank North-West; efficiency of the sales system and better customer as a result, the overall number of points in the retail network will reach 500.
VTB24’s Retail Network Investment Banking
2006 2007 Retail Business Development in 2007 Number of Points of Sale 163 328 Branches 44 48 The main focus areas in this business segment of VTB Sub-branches 87 268 are the debt capital markets (managing the issue of Loan and cash services outlets 20 6 rouble and euro-bonds), acquisition finance, Cash transactions service outlets 12 6 syndicated lending, venture capital, direct investment ATM network* 2,593 3,036 in real estate and brokerage services for retail * Including ATMs of VTB Bank and VTB Bank North-West. customers. 4. Overview of JSC VTB Bank and Other VTB Group Companies
41 In 2007 VTB’s priority goal under stiff competition market. As a result of VTB Bank’s IPO, approximately between Russian and Western players on the 120,000 retail customers became clients of its investment market was to maintain and strengthen brokerage services. The Bank is in first place in terms its market position, to increase its competitiveness the number of registered customers and is among the and to raise commission revenues from its top three in terms the number of active customers, investment banking business. occupying the 6th place in the volume of customer transactions. Debt Capital Markets Volume of bonds issued of VTB Bank as a lead- For the fourth year running VTB was the recognized manager in Russia, USD million leader among organizers and underwriters of rouble- denominated bond loans. In 2007 VTB Group was the manager of 29 bond issues for 26 issuers; the overall 3 1 2 1 Ranking of VTB Bank amount raised was RUB 77.351 billion. Moreover, 13 20 32 29 Total number of lead-managers VTB Group moved from 2nd to 1st place among bond issue managers on the domestic market, according 3,024 to the Cbond rating (www.cbonds.ru). 1,927 In 2007 VTB Group was the lead manager of 1,317 eurobond loans raising a total of USD 1.746 billion, managing six loans for six issuers, which allowed it to 688 take the 9th place in the rating.
2004 2005 2006 2007 Acquisition Finance in 2007
According to Sliyaniya i pogloshcheniya [Mergers Venture Capital & Acquisitions] magazine, VTB Bank is among the biggest merger and acquisition advisors. A strong In 2007 VTB Asset Management won a series of advisor position should translate into a strong flow of competitions for the right to manage venture capital financing assignments. funds: VTB-Venture, whose capital includes VTB Asset Management, the Russian Venture Company In 2007 VTB Bank organized financing for: (RVC) and the European Bank for Reconstruction and Development (EBRD), venture capital funds of St. the acquisition of the Nutritek Group dairy business Petersburg and the Saratov and Nizhny Novgorod for USD 230 million; regions, 50% of whose investments government the Russpetsstal company’s acquisition of the Krasny funds. Today, a highly qualified team has been Oktyabr metal factory in Volgograd; formed, along with a portfolio of potential projects. the acquisition of the Agarak copper and molybdenum works (Armenia). In 2007 a 3.6 billion rouble joint venture agreement was signed between the Bank and a venture capital Brokerage Services for Retail Customers firm, Draper Fisher Jurvetson, to manage venture capital investments and create an offshore venture Over the course of the past eight years VTB has capital fund to support innovation. actively developed its brokerage services for retail customers. According to RTS data, VTB24 is presently At present, VTB participates in the following venture one of the leaders on the Russian brokerage services capital funds (see table). 2007 VTB Annual Report
42 VTB’s VTB’s Name of the Fund Stake, RUB Stake, % Management Company "Development of the South of Russia" Closed Mutual Fund 520,000,000 40 OJSC General Management Company "VTB Venture Capital Fund" Closed Mutual Fund 1,530,500,000 50 CJSC VTB Asset Management “Regional Venture Capital Fund for Investments in Small Businesses in 60,000,000 15 CJSC VTB Asset Management the Scientific-Technical Sphere in St. Petersburg” Closed Mutual Fund for High-Risk (Venture) Investments “Regional Venture Capital Fund for Investments in Small Businesses in 42,000,000 15 CJSC VTB Asset Management the Scientific-Technical Sphere in the Nizhny Novgorod Region” Closed Mutual Fund for High-Risk (Venture) Investments “Regional Venture Capital Fund for Investments in Small Businesses in 42,000,000 15 CJSC VTB Asset Management the Scientific-Technical Sphere in the Saratov Region” Closed Mutual Fund for High-Risk (Venture) Investments
Direct Investment In 2007 VTB Bank took part in investment projects financed under a public-private partnership. In With the aim of developing direct investment business, cooperation with the Moscow City Government on a PPP a partnership agreement was concluded with Canadian basis, the Bank took part in financing the construction of real estate market leader SITQ. electric substations in Moscow.
The overall volume of VTB Bank’s participation in direct VTB Bank’s portfolio of investment transactions investment funds was RUB 2.1945 billion roubles. exceeded RUB 166 billion.
Over the course of 2007 VTB Bank acted as an investor Despite these accomplishments, there is still significant and advisor for investment projects in such regions potential for further development of VTB’s investment as Moscow, Kaliningrad oblast the Chuvash Republic, banking business. Becoming the market leader in Voronezh oblast, and the Republic of Tatarstan. Thus, investment banking services is VTB’s main goal for VTB Bank confirmed that it is one of the few Russian the coming years, as designated by the Development financial institutions to carry out large-scale regional Strategy for the Investment Business of VTB Bank, investment projects. In addition, VTB Bank took part in adopted by the Supervisory Council. financing projects in CIS countries (Georgia, Armenia). To meet this objective, work began in 2007 to create a team with experience in the largest Western and Russian investment banks and to establish an investment banking line of business under a separate legal structure.
Most Significant Projects Financed by VTB Bank in 2007
Project Financing “Sever ” – executed by JSC AK Transnefteprodukt. Construction of the “Kstovo-Yaroslavl-Kirishi-Primorsk” USD 753 million arterial gas-product pipeline. Project timeframe: 7 years.
Construction of 14 high-voltage step-down electric substations in Moscow. Overall project sum: RUB 6,879 million 40 billion roubles.
Construction and furnishing with elite livestock of a selected genetics center for breeding Scandinavian RUB 694 million mink (Kaliningrad oblast). Project timeframe: 5 years.
Development of a contemporary low-rise residential region on the shore of the Cheboksarsky reservoir in RUB 66.7 million the Chuvash Republic. Overall project value: RUB 850 million roubles. 4. Overview of JSC VTB Bank and Other VTB Group Companies
4.5. Branch Network in Russia 43
17 11 25 38 34
9 57 41 45 20 43 56 30 7 36 5 24 18 27 15 23 47 10 53 13 3 39 16 33 44 50 32 51 12 37 48 35 40 54 21 8 46 52 29 19 4 31 22 42 1 28 55 26 14 2 49 6
1 Astrakhan 16 Kazan’ 31 Orenburg 46 Tomsk 2 Barnaul 17 Kaliningrad 32 Penza 47 Tula 3 Belgorod 18 Kaluga 33 Perm’ 48 Tyumen’ 4 Blagoveschensk 19 Kemerovo 34 Petropavlovsk-Kamchatsky 49 Ulan-Ude 5 Bryansk 20 Kostroma 35 Rostov-on-Don 50 Yl’yanovsk 6 Vladivostok 21 Krasnodar 36 Ryazan’ 51 Ufa 7 Vladimir 22 Krasnoyarsk 37 Samara 52 Khabarovsk 8 Volgograd 23 Kursk 38 Saint-Petersburg 53 Cheboksary 9 Vologda 24 Lipetsk 39 Saransk 54 Chelyabinsk 10 Voronezh 25 Magadan 40 Saratov 55 Chita 11 Vyborg 26 Nalchik 41 Smolensk 56 Yakutsk 12 Yekaterinburg 27 Nizhniy Novgorod 42 Stavropol 57 Yaroslavl’ 13 Izhevsk 28 Novosibirsk 43 Syktyvkar 14 Irkutsk 29 Omsk 44 Tambov 15 Yoshkar-Ola 30 Orel 45 Tver
Moscow and Saint-Petersburg
VTB’s branch network is Russia’s third largest, which Corporate and retail customers are served directly provides a significant competitive advantage over in branch locations through ATMs, or by telephone. Russian and foreign banks. VTB24 is a leader among Russian banks in online banking services. By the end of 2007 the VTB Group’s network in Russia comprised 583 points of sale including 328 VTB24 VTB’s ATM network, which is one of the largest in points of sale serving retail customers, 103 VTB Russia, totals more than three thousand ATMs. Bank North-West points and 152 VTB Bank points; 69 Russian regions are represented, which together Divisions of VTB Bank serving the Group’s corporate account for approximately 90% of the country’s clients operate in 63 of 85 constituent subjects of the population. Russian Federation. The share of GDP of those regions 2007 VTB Annual Report
44 VTB Bank Points of Sale VTB24 Retail Network 2007 (including Moscow region) Branches 57 Sub-branches 81 Part of VTB’s sales network is the rapidly growing Operational outlets 2 VTB24 retail sales network, which covers all major Cash transactions service outlets 12 regions of Russia; VTB24’s services are accessible to Total Points of Sale 152 clients in 140 cities.
In 2007 165 new VTB24 retail locations were opened in which VTB Bank is present accounts for 99.7% of including those attributable to the migration of the GDP of the Russian Federation as a whole. locations from VTB Bank and VTB Bank North-West. Thus, the number of VTB24’s retail locations by the In every region, where we have a presence, there is end of the reporting year was 328. generally a branch and one or several divisions and sub-branches, offering the licensed list of banking VTB24 plans to provide retail banking services in services and specializations by types of business. all economically significant regions of Russia and to open points of sale in all Russian cities larger than In 2007 12 new points of sale of VTB Bank were 150,000. opened for corporate clients: Expenses on opening new retail points of sale are eight branch units: seven sub-branches and one cash expected to be recouped within three to five years, services office; depending on the size and location. a supplementary office in Sochi under the auspices of the Krasnodar branch; By the end of 2008 VTB24 plans to increase the two operational outlets under the auspices of cash number of points of sale to 500, opening more than services offices: in the cities of Ivanovo and Kurgan; 170 new ones including the migration of locations a cash transactions service desk outside the from VTB Bank and VTB Bank North-West to VTB24. ATM network in Moscow under the auspices of a supplementary office in connection with relocation.
Breakdown of VTB Bank points of sale by Federal Districts 7% as at January 1, 2008
10% 32%
8% Central Federal District — 48 (Branches — 15, Sub-branches — 27, Other — 6) Northwest Federal District — 11 (Branches — 5, Sub-branches — 5, Other — 1) Southern Federal District — 20 (Branches — 6, Sub-branches — 11, Other — 3) Volga Federal District — 35 (Branches — 13, Sub-branches — 21, Other — 1) Urals Federal District — 12 (Branches — 3, Sub-branches — 7, Other — 2) 23% 7% Siberian Federal District — 15 (Branches — 9, Sub-branches — 5, Other — 1) Far Eastern Federal District — 11 (Branches — 6, Sub-branches — 5, Other — 0) 13% 4. Overview of JSC VTB Bank and Other VTB Group Companies
45 VTB Bank North-West Besides, in early 2008 VTB affiliates were opened in India and China, as well as a representative office in VTB Bank North-West (previously the Industrial- Kazakhstan. Construction Bank) offers a full range of services to corporate and retail customers, as well as several CIS Countries in 2007 investment banking services. VTB plans to integrate VTB Bank North-West into the Group’s structure and Business development continued in countries of the to expand its presence in the Northwestern Federal CIS, one of the priority regions for VTB. The share of District. assets in the CIS rose in 2007 from 2% to 4%.
As of December 31, 2007 the VTB Bank North-West As of the end of 2007, 349 points of sale were in network includes 103 points of sale located primarily operation in the CIS, in Ukraine, Georgia, Armenia in the Northwestern region of Russia including and Belarus, the number of whose clients exceeded St. Petersburg. 480,000.
In 2007 the Industrial-Construction Bank was In Ukraine, the reorganization of CJSC Vneshtorgbank renamed VTB Bank North-West and measures were (Ukraine) was successfully completed by merging taken to prepare for the integration of business; in it with VTB Bank (Ukraine); 70 new points of sale particular, a number of processes and IT-systems were opened. The capital of the unified VTB bank in were unified and fees and interest policies were Ukraine rose in 2007 by USD 46.5 million. In 2007 a harmonized. representative office was opened in Kyrgyzstan.
VTB’s plans include completing the migration of client Western Europe segments as allocated by the Group: The presence of subsidiaries in Austria, Germany, retail business and retail divisions of Group banks France, Cyprus, Switzerland and Italy (representative will be moved to VTB24; office) allows VTB Group to offer a full range of the corporate business of VTB Bank North-West services to corporate clients. An important event outside the Northwestern Federal District will be of 2007 was the improvement of the structure and moved to VTB Bank; management model of VTB Group’s banks in Europe. VTB Bank branches in the Northwestern Federal A controlling stake in the bank in Luxemburg was District will be moved to VTB Bank North-West. sold; the investment banking specialization of VTB Bank (Europe) was strengthened. The center of the European integration of the Group’s corporate 4.6. Business Outside of Russia business was moved from London to Vienna and all necessary measures related to it were taken.
In 2007 VTB Group increased its international Asia and Africa presence through the acquisition of CJSC Slavneftebank in the Republic of Belarus, which in Branches in China and India (2008), a subsidiary 2007 was renamed CJSC VTB Bank (Belarus); and in Angola, a joint venture bank in Vietnam and a to receiving a license for Banco VTB-Africa S.A. financial company in Namibia – all of this allows VTB in Angola. Group to support Russian businesses carrying out foreign trade projects and operating in these regions. 2007 VTB Annual Report
46
Russia
Belarus Great Brirain
Germany Ukraine France Kazakhstan Switzerland Austria Italy Kyrgyzstan
China Cyprus
India
Vietnam
Singapore
Angola
Namibia
Subsidiary Financial company Representative office Branch VTB Bank Europa branch 4. Overview of JSC VTB Bank and Other VTB Group Companies
47 4.7. Financial Markets The Group plans to continue borrowing in Russian Transactions and international markets in the course of 2008. Securities Transactions Debt Financing Transactions Historically, VTB conducts transactions on the In 2007 VTB Bank continued active borrowing in the financial market involving all kinds of securities, capital markets. Last year the aggregate amount of including stocks and bonds denominated in Russian Notes outstanding under Programme (“Programme”) roubles and in foreign currencies and promissory for the issuance of Euro Medium term Notes (EMTN) notes. The bank offers its customers a broad was increased to U.S. $20 billion. Under the range of services on the securities market. Programme five Series of Eurobonds were issued These include: in a number of different currencies (euros, pounds sterling, US dollars and roubles) totaling about U.S.$ brokerage services on the MICEX, the RTS Stock 5.3 billion. Issues were successfully placed under the Market and on the off-exchange market; best market conditions and enjoyed high demand completing repurchase agreements with the from international investors. securities of Russian issuers; buying/selling of stocks, sovereign bonds and In March 2007 VTB Bank completed a dual-tranche Eurobonds of the Russian Federation and of Russian issue of Eurobonds for EUR 1 billion and GBP 300 corporate issuers; million. At the time of the issue the euro tranche the issue, repayment (including early), and was a record transaction in euros among Russian novation of simple VTB promissory notes and other banks-issuers and the sterling issue was the first operations with promissory notes. of its kind for Russian borrowers. VTB Bank is a major participant in the OTC trade In October 2007, despite the crisis in the of government and corporate bonds and a leading international financial markets, the Bank placed market-maker on MICEX for fixed-yield instruments. a benchmark issue of Eurobonds among Russian In addition, VTB actively conducts repurchase issuers for U.S. $2 billion. VTB won a EuroWeek agreements with major Russian and foreign banks. Award for this issue as the CEEMEA Financial Institution Bond of the Year. The transaction As of the end of 2007, the Group’s own securities generated strong interest, which in the challenging portfolio totaled USD 13.5 billion, or 15% of total market conditions, attests to the confidence that assets. international investors have in the strength of the VTB’s credit. Exchange Operations on the Currency Markets
Simultaneously, VTB Group continued to raise In 2007, as in previous years, foreign-exchange syndicated loans. Thus, from March through operations with various currency pairs remained May of 2007 VTB Bank (Austria) raised three a major focus area of VTB Bank’s activity on the syndicated loans for $U.S.280 million maturing in currency markets. This is due to the large number February 2010. In July the Russische Kommerzial of the Bank’s customers who carry out foreign Bank AG received a syndicated loan for U.S.$ 75 trade operations and thus ensure a stable demand million maturing in August 2010. In August VTB for products connected with currency-exchange Bank (Austria) raised financing in the form of SSD operations, as well by the necessity for the prompt (Schuldscheindarlehen) for U.S.$75 million maturing response to emerging balance sheet risks. in July 2010. 2007 VTB Annual Report
48 The past year was characterized by a significant hard currencies with foreign contractors, as well as increase in the volumes of exchange operations MosPrime interest rate futures on MICEX. carried out and by the growth in their profitability, which was largely due to Russia’s increasingly strong Client Operations on the Currency Exchange, foreign trade, and the high volatility of the currency Money and Commodities Markets markets both within Russia and beyond its borders. An increase in customer operations was achieved in Operations with the USD/RUB pair (spot and forward) 2007 thanks to active expansion and improvement of alone in 2007 totaled more than USD 720.0 billion the product line of treasury services with the use of (the figure for 2006 was USD 280.0 billion). On competitive approaches when working with various the international market, volume for all currencies customer segments. totaled more than USD 60 billion (USD 50.0 billion in 2006). The total volume of options executed On the money market the volume of overnight surpassed their value by USD 300 million. Income operations totaled RUB 3,040.9 billion in 2007. received from our own operations on the currency As part of its priority approach to servicing strategic markets in 2007 was the largest in recent years. clients, services for attracting and placing funds were applied using remote service systems (Reuters- Banknote Operations Dealing, BS-Client) with various kinds of clients. The volume of fundraising operations exceeded RUB 355.5 VTB’s cash forex activity continues to grow. The Bank billion. Short-term fixed-limit lending to corporate strengthened its position as one of the main forex clients reached RUB 169.6 billion, which allowed our players in Russia, remaining in the top five traders in clients to effectively finance cash gaps arising during banknote operations on the Russian interbank market. daily operations for periods from one to 30 days.
As well as strong profit growth, (profits more than To help customers manage risks, particularly those quadrupled compared to 2005 and were up 36% relating to the high volatility of currency exchange against 2006), the bank saw the volume of operations rates and significant price fluctuation for commodities, with foreign banks grow (doubling since 2005 and up VTB Bank offers derivative operations on the currency 41% from 2006) as well as the volume of operations exchange, stock exchange and OTC markets. with Russian banks (6.7 times the 2005 level and more than double the 2006 level). Using the Bank’s derivatives expertise enables customers to plan long-term and adopt the most Money Market Operations attractive hedging strategy. As a result, in 2007 operations of the “forward” and “currency option” In 2007 the bank used domestic and international types were actively carried out with corporate clients. money market operations to regulate liquidity and to The total volume of the given operations was more ensure its constant presence in this segment of the than RUB 10.6 billion. financial market. The past year was characterized by significant growth (more than 100% in comparison One of the priority areas of focus of VTB’s activity on with 2006) of the volume of operations on the the financial markets is offering its clients increasingly interbank market and “conversion swap” operations sophisticated financing tools. In line with this the performed to regulate current liquidity. Bank is constantly working to improve active products and introduce new, complex ones, of which the In 2007 FRA (Forward Rate Agreement) operations most important are operations for hedging interest- were introduced into the trading toolkit on the rate risks, using remote servicing and simplifying interbank market and the Interest Rate Swap into document flow. 5. Internal Controls 49
5.1. Risk Management core units for the basic types of risk and/or lending procedure functions (Lending Risk Management, Market and Operational Risk Management, Expert Risk Management Structure Service for Loan Applications, Lending and Mortgage Operations Management); The Bank employs a complex system for managing Consolidated Risk Analysis Management, basic banking risks (credit, market, liquidity, responsible for risk management on the level of VTB operational), ensuring the identification, assessment Group, including the introduction of the Basel II and limitation of accepted risks and control over standards. their size and structure. The basic principles of the risk management system at As a result of the noticeable influence of risks taken JSC VTB Bank are: on by subsidiary banks on overall results and the efficiency of the Bank’s activity amid integration a clear-cut distribution of responsibilities among into the Group, a great deal of attention was paid in the Bank’s authorized management bodies and 2007 to taking measures to develop and introduce executives during the decision-making process; effective procedures for control of risks on a an integrated approach when analyzing various types consolidated basis including the following: of accepted risks; the independence of those business units that basic principles and regulations regarding the provide assessment and control of risks from those lending policies of VTB Group were adopted; units that initiate the corresponding operations; the functional interaction with subsidiary banks the use of the most up-to-date methods of risk in the realm of risk management was fine-tuned assessment; including through working collegial bodies the existence of an extensive reporting system at created under the Management Committee of VTB every level of the Bank’s management. Group (first and foremost, the Risk Management Commission, as well as the Commission for Asset The organizational system of risk management and Liability Management); includes various collegial bodies (among them questions of data collection with the aim of a loan committee, a lower loan committee, loan consolidated risk analysis for VTB Group were committees of branches, a committee for asset and worked through and the first stage of introducing a liability management) and structural units. Moreover, procedure for forming a periodic consolidated risk given further expansion of the international VTB report was completed. Group and the obligations arising out of VTB’s public listings, in 2007 a new organizational structure of risk Credit Risk management was introduced into the Bank, providing for the adequate expansion of functionality and the In 2007, we continued our work on the “Credit strengthening of key focus areas of risk management. Policy of JSC VTB Bank for 2007–2008”, which As a result, a Risk Department was formed sets the basic principles of the Bank’s credit in the Bank consisting of the following structural risk management in order to improve credit risk units: management methods. 2007 VTB Annual Report
From objectives to actions elaborate strategy + timely decisions
2007 VTB Annual Report
52 One of the main instruments of the current In 2007 the Bank improved the decision-making assessment of credit risk in the Bank is the method system for lending including for transactions of ranking clients according to risk level based on carried out on the branch level within limits of the an evaluation of their finances payment history, independent acceptance of credit risks. market positioning and other risk factors. Over the course of the year the Bank continued to improve In 2007 the Bank paid a great deal of attention to this risk assessment tool. After a careful analysis of business development in the medium-sized business the best practice and international experience in this segment expanding its selection of credit products field and the accumulated statistics of ratings and accessible to customers in the given category, for losses, we managed to refine our ranking methods. which service is provided in the Bank’s regional In the framework of a project for improving credit business units. One of the most important projects activity, a model was developed in conjunction was the start of the “New Lending Process for with international consultants, for the assessment Medium-Sized Business Customers” project of transaction risks making it possible to take into involving an integrated development of new account the risk characteristics of a concrete lending approaches to the lending process (including operation while delegating authority in taking a innovations in the way the Bank’s business units lending decision and determining its cost conditions. work together and in the system for ranking customers, price formation for lending transactions, Another important focus area of credit risk accounting for transaction risks, etc.). For medium- management was the establishment and monitoring sized clients we began to develop a system of of the structure of the credit portfolio as set down standardized credit products with lending terms in the Lending Policy. Over the course of the tailored to clients of various categories, as well as year, on an ongoing basis, the Bank monitored a system of authorised persons for taking credit the structure of the credit portfolio on a sectoral, decisions for each of these categories. regional and national basis broken down into types of credit products and the structure of the security Market Risk provided. Moreover, the system of sectoral risk management held to ensure a rapid response to The key elements of the Bank’s system to assess and negative developments in various market segments manage market risks are: including specifying additional requirements for the financial position of borrowers in various sectors quantitative assessment of market risks using the (the manufacture and trade of alcohol products and Value-at-Risk methodology (VaR) for assessing risk others). exposure to marketable securities and currency risk. sensitivity analysis to assess the potential impact on In 2007 a scheduled work was performed to make the balance sheet of various market movements such lending operations more efficient, in particular as interest rates and currencies; through the standardization of various aspects scenario analysis of the Bank’s assets and liabilities (optimization of credit risk assessment procedures, operations (liquidity risk, interest risk); increasing labor productivity and decreasing management of interest risk and liquidity risk by operational risks). A system of “standard base establishing clear target figures for the assets and conditions for lending to customers” was developed liability structures based on size, term, profitability/ and introduced (applicable to customers of various cost; categories, various types of security, etc.); a package procedure for establishing and firmly controlling of standard forms of credit and security agreements compliance with limits on the Bank’s acceptance was adopted for all types of transactions and lending of market risks (currency exposure, conversion decision formats were improved. operations and operations with market securities 5. Internal Controls
53 broken down by type of operation and instrument The main task of current liquidity management is and stop-loss limits); changing the structure of the Bank’s current assets evaluation of the economic capital necessary to cover and liquidities, to reduce liquidity gaps to a set level market risks. and there are fixed deadlines for meeting demands The market risk management system was improved and discharging obligations. This is accomplished in 2007, primarily in terms of interest-rate risk and by the Bank’s Treasury determining in real time the market risk with securities operations. The main current exposure to current liquidity risk, the current measures taken were: values of liquidity gaps in accordance with internal with regard to interest-rate risk: the establishment limits, as well as limits established by the Central of interest rates for asset and liability operations, Bank of Russia. Management of current liquidity taking into account regular reporting on the size and by the Bank’s Parent Organization and branches is structure of interest rate exposure; the establishment carried out in a centralized fashion. of limitations on the size of interest rate exposure, broken down by currency and terms and control over Operational Risk compliance with them; with regard to market risk for securities operations: In terms of operational risk the Bank carries out improving the methodology of quantitative risk regular exercises to assess risks and ensure analysis broken down by type of operation (reverse appropriate actions are taken in compliance with repurchase agreements, derivative products). the principles established by the regulatory acts
Liquidity Risk Proactive measures for risk limitation are complemented Management of quick liquidity is the Bank’s main with insurance programs providing for minimization goal in daily asset and liability management, of possible loss and diversified by the types and volumes ensuring there are sufficient cash balances to cover of transactions. payments whether in cash or electronic form in the appropriate currency. Central Bank of Russia, and the Basel Committee on The Treasury Department is responsible for quick Banking Supervision (including “Basel II”). liquidity management. It provides real-time estimates (over the course of the day) of current payment Among the primary methods of the Bank’s operating position and an estimate of the change of the risk management are the regulation of procedures payment position based on the payments calendar for completing operations, the application of and scenario analysis. Branches’ quick liquidity is procedures of multi-level and independent control managed by way of setting limits on cash balances in over their completion, monitoring of the functioning regional payment processing centers at the end of the of IT systems, the application of principles for branch’s operating day. splitting and limiting employees’ functions and authority, the use of mechanisms for taking collegial decisions, and the establishment of individual limits As part of the lending activity on the size and types of operations carried out by improvement project jointly with employees. the international consultants the model of transaction risk assessment These pro-active measures for limiting risks are supplemented by insurance programs that minimize was developed in the Bank. possible losses and are diversified in accordance with the types and volumes of the operations being 2007 VTB Annual Report
54 carried out. The Bank’s total insurance coverage in the transition to the new Basel II standards, as part 2007 was approximately USD 343 million including of a standardized approach. a comprehensive insurance against criminal acts in accordance with the international standards Risk Management objectives for 2008 of “Banker’s Blanket Bond” and “Electronic & Computer Crime”; it also includes insurance cover VTB Group intends to further improve both for valuables during transfer, documentary securities transparency and risk control. located in storage, ATMs and possible losses resulting from fraudulent use of both credit and To that end control procedures will be improved at debit cards. the Group level for operations with corporate clients and contracting banks and unified standards will be In order to ensure effective detection, assessment introduced to assess and monitor the concentration and management of the operational risk, the Bank level of national and sectoral risks within the actively collected information on operational Group by country and sector. In addition, further losses that were sustained, in accordance with the improvements will be made to information exchange requirements of Basel II covering both the business and analysis as part of risk management at the Group units of the Bank and its regional network. We are level, which should facilitate the decision-making planning to extend the system to all of VTB Group’s process. members in the future. In 2008 the Bank will continue to improve methods Measures and Plans Related for ranking the Bank’s borrowers and procedures for to the Introduction of the Basel II System lending to clients grouped in various categories. In particular, the system for delegating credit approval In 2007 JSC VTB Bank carried out work on the authority will be improved. With regard to standard preliminary evaluation of variants and necessary operations with highly creditworthy customers, the organizational, personnel, technical, and material practice of delegating authority for taking lending resources needed to move the Bank’s risk decisions will be expanded to the level of the heads management standards to Basel II standards. of the corresponding business units, which will allow Moreover, elements of Basel II were taken into us to make the lending process more efficient, and account to establish various risk-management will promote better customer service. procedures.
As the plans and timeframe for the introduction 5.2. System of Internal Controls of Basel II are adopted into Russian law, the Bank will aim to harmonize the Bank’s risk management The Development Concept of the Internal Controls standards with the new standards, as well as System at VTB Bank defines internal controls as the necessary methodological and procedural activity undertaken by the Supervisory Council, documents, while simultaneously preparing a Management, the CEO, heads of business units and corresponding budget and ensuring the necessary employees of the Bank aimed towards ensuring the coordination of the work of the Bank’s structural appropriate performance of the following tasks: business units in this project. The efficiency and effectiveness of operations That said, in connection with the introduction, as conducted by VTB Group, including ensuring of January 1, 2008 of Basel II principles into the the safety of VTB Group’s assets, along with risk banking legislation of EU countries, the Western management; European banks of VTB Group have already prepared The adequacy and timeliness of financial and 5. Internal Controls
55 administrative information and reporting; of the effectiveness of the system Compliance with legal requirements and standards of internal controls regulating the activity of VTB Group; Improvement in the organizational structure Ensuring that neither VTB Group nor its clients and the distribution of authority and responsibility are involved in criminal conduct such as money Policies and procedures for managing human capital laundering or financing of terrorism. Human talent
Several years ago in an inspection the Central Risk Assessment Bank of Russia noted that VTB Bank possessed a sufficiently effective system of internal controls Risk identification and analysis adequate to the nature and scope of the Bank’s Managing change operations. Control Actions Strong internal controls are crucial to ensure our business is conducted to the highest standards, Policies, procedures, control measures backed and to increase our attractiveness for customers, up by execution shareholders, investors and other stakeholders Measures for supporting business continuity, on the domestic and international markets.. and control over their execution We are seeking to comply with the international Strong controls on money laundering and financing best practice (the rules of the Basel Committee of terrorism on Banking Supervision, the Institute of Internal Auditors and the Committee of Sponsoring Information and Communications Organizations of the Treadway Commission). Quality of information Strong internal controls improve VTB Group’s Effective communication management system in the following areas: Monitoring the creation of a unified control environment, a unified system of strategic and financial planning Continuous monitoring and of risk analysis within VTB Group; Mechanisms of notification concerning material the integration of information systems at the level shortcomings of the Group, the Bank, subsidiaries and separate business units; For the effective realization of these principles of the creation of clear and transparent system for internal control at VTB Bank, a system of control decision-making, control and reporting at the and inspection bodies is in place: Bank, its branches and VTB Group as a whole. The Audit Committee of the Board; VTB Bank’s activity in developing effective internal The Audit Commission; controls is aimed at supporting the strategy of The Internal Control Department. VTB Group and at improving the following basic elements of the system: 5.3. The Audit Committee Control Environment and Control Culture The Audit Committee was created in 2007 with the A belief in honesty and ethical values aim of analyzing and supporting the internal audit Evaluation and control by the Supervisory Council system. 2007 VTB Annual Report
56 Members of the Audit Committee: compliance with the relevant regulations, internal bank controls, the legality of the operations carried Matthias Warnig – Committee Head (independent out by the Bank (by comprehensive inspection or spot member of the Supervisory Council of VTB Bank); checks). Aleksey L. Savatyugin – Committee Member (member of the Supervisory Council of VTB Bank); Aleksey V. Ulyukaev – Committee Member (member of 5.5. Internal Control the Supervisory Council of VTB Bank). Department (ICD) More detailed information on the activity of the Audit Committee can be found in the section “Corporate According to the Charter of VTB Bank, control Governance,” on page 65. of financial and economic activity is carried out within the Bank by the Internal Control Department (previously the Internal Control Service) established 5.4. The Audit Commission in January 2000.
Control of the financial and economic activity of VTB The brief of the ICD is to perform internal controls and Bank is carried out by the Audit Commission, which is to work together with the Bank’s administrative bodies elected by the Annual General Meeting of the Bank’s to ensure effective functioning. The ICD’s task is to stockholders. contribute to the high-quality and efficient operation of the internal control system. The size and composition of the Bank’ Audit Commission are determined by the AGM. Members of As of January 1, 2008 the Internal Control Department the Bank’s Audit Commission can not concurrently be of VTB Bank will comprise 135 employees. The head members of the Bank’s Supervisory Council or hold of the ICD is Igor B. Turuev. positions in the Bank’s executive bodies. To carry out internal control at Bank branches internal Members of the Audit Commission of VTB Bank control groups have been created at the branches, as of January 1, 2008: within the structure of the Internal Control Department.
Vladimir V. Lukov — Chairman (Deputy Director of the The ICD performs the following functions: Department of Financial Policy of the Finance Ministry of the Russian Federation); checking and evaluating the effectiveness of the internal control system; Olga E. Gritsai — member of the Inspection checking that methodology for assessing banking Committee (Advisor to the Department of risks and procedures for managing banking risks are Corporate Management of the Ministry of Economic properly applied; Development and Trade of the Russian Federation); checking the reliability of the internal control system’s functioning with the use of automated Olga A. Popova — member of the Audit Commission information systems; (Head of Property Management of Financial, Foreign checking the truthfulness, completeness, objectivity Economic, Tax and Customs Organizations at and timeliness of accounting and reporting and Rosimushchestvo (the Property Agency of Russian their testing, as well as the reliability (including the Federation). truthfulness, completeness, and objectivity) and timeliness of the collection and presentation of The Audit Commission monitors the Bank’s information and reporting; 5. Internal Controls
57 testing the truthfulness, completeness, objectivity external auditor at a meeting of the Audit Committee, and timeliness of the presentation of other the recommendation of the Supervisory Council to the information, in accordance with the regulatory General Shareholders Meeting and the approval of legal acts to government bodies of the Russian the proposed candidate at the Bank’s Annual General Federation; Shareholders Meeting. checking applicable methods for ensuring the safety of the Bank’s property; On March 19, 2007 VTB Bank announced an open checking the compliance of the Bank’s internal tender for audit firms to perform VTB Bank’s annual regulatory acts with regulatory legal acts, and the statutory audit for 2007. standards of self-regulating organizations; checking internal control processes and In the announcement of the open tender basic procedures; information concerning the tender was given: testing systems created with the aim of complying the ordering customer, the source of financing with legal requirements and professional codes of for the order, the subject of the contract, the conduct; place, conditions and timeframe for the provision other functions provided for by the Russian Central of services, the initial price of the contract, the Bank Resolution No. 242-P of December 16, 2003, beginning and end dates for the submission On the Organization of Internal Control at Credit of applications to participate in the tender, Organizations and Banking Groups, and by the etc.; a draft audit services agreement was internal regulatory acts of VTB Bank. also presented.
The Internal Control Department, within the On April 19, 2007 the audit tender for the annual framework of its competency, works together with statutory audit was held. According to the decision the Bank’s external auditors with regard to the of the competition committee, CJSC Ernst & Young presentation of information on the Bank’s internal Vneshaudit was named the winner of the tender. control system and on the main flaws detected by the ICD in the course of the period being By the decision of the Bank’s Annual General examined by the auditors. Shareholders Meeting, CJSC Ernst & Young Vneshaudit was appointed as VTB Bank’s auditor for the year 2007. 5.6. VTB Bank’s External Auditor
Every year VTB Bank engages an external auditor in order to check and confirm the reliability of its annual financial statements,.
Based on its scrutiny of the financial and economic activity of the Bank, the external auditor prepares a report, which is submitted to the Audit Committee for preliminary assessment. The prepared report is sent to the Bank’s Supervisory Council and is also submitted to the Bank’s Annual General Shareholders Meeting.
The Bank’s external auditor is designated as a result of a tender, the approval of the candidacy of the 2007 VTB Annual Report
From actions to achievements individual effort + understanding of common objectives
2007 VTB Annual Report
60 6. Corporate Governance
6.1. Overview of the Corporate VTB Bank provides for the timely disclosure of full and Governance System reliable information on the Bank’s activity including information on its financial situation, economic figures, property structure and governance, with the aim of The Bank aims to develop the corporate governance ensuring the Bank’s stockholders and investors take system in accordance with international best practice. well-informed decisions; VTB Bank has controls in place over the use of VTB Bank aims to observe strictly the provisions of confidential and insider information; these include Russian corporate governance law and strives to documents establishing rules for preventing the use of meet the highest international standards, as well this information; as the recommendations of corporate governance VTB Bank ensures effective control of its financial and best practice, including the Code of Corporate economic activity in order to protect the rights and Conduct recommended by the Federal Securities and lawful interests of its shareholders. Exchange Commission of Russia. VTB Bank’s corporate governance system lays down specific responsibilities for: In all its activities VTB Bank is committed to the strict adherence to the provisions of the Russian law in the sphere the Annual General Meeting of Shareholders; of corporate management. the Supervisory Council; the Chairman and CEO; VTB Bank’s existing system of corporate governance the Management Board. is based on the following principles, which reflect the provisions of Russian legislation, as well as the In order to carry out an examination and approval of requirements of the Central Bank of the Russian its financial reporting the Bank annually engages an Federation and the recommendations of the Federal external auditor who is not connected with the bank Service for Financial Markets of Russia: and/or its shareholders by any property interests.
shareholders are given a real opportunity to exercise At the same time, VTB Bank recognizes the need to their rights to participate in VTB Bank; improve its corporate governance. This follows from the Supervisory Council carries out strategic the requirements of regulatory bodies, investors, rating governance of the activity of VTB Bank and effective agencies and by the rapid pace of VTB Group’s growth. control of the activity of its executive bodies; members of the Supervisory Council are accountable In 2007 VTB Bank continued to work actively on to the shareholders of VTB Bank; improving the system of corporate governance: VTB Bank’s executive bodies are given the opportunity to carry out the effective leadership of the Bank’s Management approved the Fundamental its current activity, reasonably, in good faith, and Directions for the Development of the Corporate exclusively in the interest of VTB Bank; the executive Governance System of the Bank and its subsidiaries bodies are accountable to the Supervisory Council for 2007–2010; and to the shareholders of VTB Bank; the Bank has now allocated responsibilities for 6. Corporate Gonernance
61 implementing its corporate governance guidelines Adherence to the Corporate Governance Code among the appropriate business units; a separate investor relations structural unit was VTB Bank adheres to the basic provisions of the created; Corporate Governance Code recommended by the a series of measures were taken to raise the Bank’s Federal Securities and Exchange Commission of level of transparency including a set of standards for Russia: the disclosure of information and an improvement of investor relations. As a result of these measures, the Bank provides its shareholders with the the Bank was awarded the second place in the opportunity to exercise their rights including the Survey of Transparency and Disclosure by Russian right to participate in the decision-making process by Banks conducted annually by Standard & Poor’s; voting at the AGM, the right to receive dividends and a series of measures were taken to improve the right of access to information; corporate management in connection with the the Bank operates a principle of equal treatment of IPO: the inclusion of two independent directors its shareholders holding an equal number of a certain on the Supervisory Council, the creation of an class of shares, as well as guaranteeing the effective Audit Committee, the adoption of a Regulations on protection of their rights in case of violation; Procedures for the Use of Insider Information; the Bank’s Supervisory Council ensures strategic on the basis of methods of the International Finance governance and control of the activity of executive Corporation, the Russian Institute of Directors and bodies – of the Chairman and CEO and the the Expert Rating Agency, the Bank’s management Management Board. In April 2007 independent conducted an assessment of the level of corporate directors were introduced to the Supervisory governance. As a result of this assessment, VTB Council. The Supervisory Council is accountable to Bank’s system of corporate governance was shareholders; recognized as meeting the requirements of Russian the Chairman and CEO and the Management law. In addition, the necessity of introducing a Board direct the Bank’s current activity. The series of internal documents was brought to light, executive bodies of the Bank are accountable to the along with the need to take measures aimed at Supervisory Council and to shareholders; bringing the level of corporate governance at VTB the Bank ensures a timely disclosure of full and Bank in line with that of global best practices. reliable information including its financial position, economic figures and the structure of its property Bank employees are participating in various projects and governance in order to provide shareholders and for improving regulatory standards of the corporate investors with the opportunity to take well-informed governance. Thus, for example, the Bank is part in the decisions; Working Group created under the National Council on the Bank acts in respect with the rights of interested Corporate Governance, which was set up to review parties including workers, as required by law, the existing legislation. encourages the active collaboration of the Bank and interested parties in order to increase its assets, the In partnership with Russian and international banking value of its shares and the creation of new jobs; groups (UniCredit, Citigroup, Erstebank, Socie´te´ the Bank has built an effective system of control for Ge´ne´rale and others), with professional associations its financial and economic activity in order to protect (the Association of Russian Banks, the Russian the rights and interests of its shareholders. The Bank Institute of Directors, the Association of Independent has created an Audit Commission accountable to the Directors, and others), VTB Bank organizes meetings General Shareholders Meeting. The Audit Committee, for the regular exchange of corporate governance which reports to the Bank’s Supervisory Council, experience. helps increase the effectiveness of the system of internal control of the Bank. 2007 VTB Annual Report
62 In 2008 a Code of Corporate Conduct will be formation, under the VTB brand of an international approved by the Supervisory Council. financial group that is unique in the Russian banking sector dictate the necessity of building a flexible The Code of Corporate Conduct fulfills the system that would ensure the possibility of prompt requirements of Russian legislation and regulatory fine-tuning to meet the needs of our customers. In bodies, as well as principles recognized in global addition, international experience also indicates practice, in particular the Principles of Corporate that, at a certain stage, the development of one’s Governance of the OECD. own solutions in the sphere of information policy is simply indispensable. Here, as in all of its work, VTB In addition, in 2008 as part of measures undertaken Bank strives to adhere to the highest international to develop VTB Bank’s corporate management standards. system, the Supervisory Council will also approve the Code of Ethics. In 2007 VTB Bank came second (from sixth the year earlier) in the annual Standard & Poor’s transparency The main goal of the Code of Ethics is to define survey of Russian banks. for the Bank, its employees and the members of its Supervisory Council, the principles and rules of Having received such a high recognition of its efforts, business conduct and ethics aimed at increasing the Bank does not intend to stand still, and plans VTB’s capitalization, financial stability, and efficiency. to work tirelessly and purposefully to improve its transparency keeping an eye on the experience of its VTB’s Code of Ethics reflects its fundamental peers. corporate values and principles; questions concerning the resolution of conflicts of interest; VTB Bank has already developed a series of questions concerning relationships with clients, documents governing the handling of inside business partners, government bodies, competitors information: and employees; questions of corporate style and other aspects. Instructions regarding internal control of the Bank’s own trading activities; VTB Bank’s Information Policy A list of measures aimed at preventing the illegal use of sensitive information in the Bank’s activity own VTB Bank strives for the prompt, objective and trading ; complete reporting of its activity, using all available A list of measures aimed at preventing conflicts of means of communication. With over 120,000 new interest ; shareholders the Bank is obliged to communicate Regulations on insider information. fully on all its activities. The documents named above define the circle of The Bank has to balance the requirements for insiders, their rights and obligations, the list of the disclosure of information and the interests of documents falling under the category of insider shareholders, investors and other stakeholders by information and measures for protecting insider avoiding unauthorized disclosure of confidential and information from illegal use. commercially sensitive information concerning the Bank’s activity. Based on a self-assessment conducted in 2007 of the level of VTB’s corporate governance and in VTB’s information policies meet the requirements of the framework of the adopted “Plan of Measures Russian legislation. At the same time, adherence to for Improving the Corporate Governance System VTB Group’s development strategy, along with the of JSC VTB Bank, the decision was taken to 6. Corporate Gonernance
63 develop Regulations on the Information Policy material events in the activity of the Bank and VTB of VTB, which is planned to be submitted for Group. approval in 2008 at a meeting of the Supervisory Council. The given Regulations will become the foundation of interrelations between the Bank 6.2. The Supervisory Council and its shareholders, investors, customers and of VTB Bank other stakeholders and will also promote a further increase of the Bank’s level of transparency and the level of trust towards the VTB brand. The Supervisory Council of VTB Bank acts on the basis of Russian law, the Bank’s Charter, the Regulations The information policy of VTB Bank now under on the Supervisory Council and other internal development will be based on the following documents of VTB Bank. principles: The Supervisory Council’s responsibilities include the periodic and prompt provision of information; setting general policies and broad principles for the the promptness, completeness, reliability and Bank with the exception of those issues defined by consistency of the information presented; Russian law and the Bank’s Charter as being under equality of rights of all interested parties to responsibility of the Annual General Meeting. receiving information, taking into account the standards and requirements established by Main Duties current legislation and regulatory bodies; maintaining a reasonable balance between the The Supervisory Council of VTB Bank performs the transparency of VTB Bank and its commercial following functions: interests; maintaining confidentiality of information that determining priority areas of the Bank’s activity; comprises an official or commercial secret, convening Annual and Extraordinary General and carrying out control over the use of insider Meetings of shareholders except for the cases information. specified in Item 8, Article 55 of the Federal Law On Joint-Stock Companies; With regard to the disclosure of information endorsing the agenda of an AGM; and the provision of information, VTB Bank increasing the Bank’s charter capital through the uses various forms: the Bank’s quarterly and issue by the Bank of additional shares within the annual reports, the Bank’s bookkeeping and quantity and classes (types) of authorized shares in financial accounting, announcements of material those cases provided for by Russian law and by the information, and others; also, the following Bank’s Charter; channels: print and electronic mass media, the the placement by the Bank of convertible securities Internet and Intranet, and supply of information and other equity securities convertible into Bank and documentation to shareholders on request. shares, in cases provided for by Russian law and the Bank’s Charter; One of the least expensive and most accessible determination of the market value of assets means for disclosing information to shareholders (monetary valuation), price of issue and repurchase and other interested parties is the Bank’s of the securities specified in Russian law; corporate website, where it periodically publishes acquiring shares and other securities issued by the reporting according to Russian and international Bank in the cases specified by Russian law; standards, the Charter and regulations concerning appointing the President and CEO and members the Bank’s governing bodies and information on of the Bank’s Management Board; fixing the size 2007 VTB Annual Report
64 of the Management Board and terminating their Supervisory Council’s activity, in particular: authority ahead of schedule, fixing remuneration and compensation paid to the Chairman and CEO formalizing criteria for the selection of directors and the members of the Bank’s Management and procedures for their appointment (including Board; for independent directors), introducing training recommending the amount of remuneration and for directors before they assume their duties, compensation to be paid to the members of the conducting yearly assessments of the effectiveness Audit Commission and determining the fee to be of their work, etc.; paid for the services of the external auditor; creating a Nomination and Remuneration issuing dividend recommendations; Committee. using the reserve fund and formation, as well as using other funds of the Bank; Results of the Supervisory endorsing VTB internal documents except for the Council Work in 2007 internal documents, which must be endorsed by the General Meeting of shareholders and also In 2007 12 meetings of the Supervisory Council other internal regulations of the Bank, which and five absentee votes were held. under the Bank’s charter must be endorsed by its executive bodies; Membership opening of branches and representation offices of of the Supervisory Council the Bank as well as transition of branches to the status of the Bank’s departments; The number of members on the Bank’s Supervisory approval of interested-party transactions, Council is determined by decision of the General conclusion of major transactions connected with Shareholders Meeting, in accordance with the the acquisition and alienation of property by the requirements of the Federal Law On Joint-Stock Bank in cases provided for by Russian law and the Companies and the Bank’s Charter. Members of Bank’s Charter; the Supervisory Council are elected from a number preliminary consideration of the annual report of of candidates nominated by shareholders, as set the Bank; in the Bank’s Charter. appointing the head of the Bank’s Internal Control Department and relieving him of duty; Members of the Bank’s Supervisory Council are endorsing the registrar of the Bank and the elected for a term lasting until the following annual terms of contract with the registrar and as well as General Shareholders Meeting. cancellation of the contract; writing off bad debts on loans exceeding USD one Members of the Bank’s Supervisory Council million per debtor from the Bank’s balance sheet, should meet the qualification requirements and charging the loss to loan-loss provisions; the requirements regarding business reputation the issue by the Bank of bonds and other established by Federal laws and those regulatory securities (with expectance of securities acts adopted in accordance therewith by the convertible into shares of the Bank). Central Bank of Russia.
Issues assigned to the Supervisory Council may Persons elected to the Supervisory Council of the not be delegated to the Bank’s Management and Bank may be re-elected an unlimited number of Chairman and CEO. times.
In 2008 it is planned to undertake a set of As of January 1, 2008 the Supervisory Council of measures aimed at increasing the efficiency of the VTB Bank consisted of the following members: 6. Corporate Gonernance
65 Aleksey L. Kudrin Education: graduated in 1994 from the St. Petersburg Chairman of the Supervisory Council of VTB Bank State Naval Technical University (the engineering and (since 2002) economics faculty) and in 2005 from the Business School of the University of Chicago (USA), with an Date of birth: 1960 Executive MBA degree. Ph.D in Economics.
Education: graduated in 1983 from Leningrad State Holds the following positions in other organizations: University (now St. Petersburg State University), Deputy Minister of Economic Development and Trade Economics Faculty. Ph.D in Economics. of the Russian Federation (since 2005).
Holds the following positions in other organizations: Previously held the following positions: Director of Deputy Chairman of the Government of the Russian the Department of State Regulation of Tariffs and Federation – Finance Minister of the Russian Infrastructure Reforms of the Ministry of Economic Federation (since September 2007), Chairman of the Development and Trade of the Russian Federation Supervisory Council of ALROSA Company, Chairman (2004-2005). First Deputy General Director of JSC of the Board of Directors of the Agency for Deposit Lenenergo (2000-2004), Deputy General Director Insurance state corporation, and member of the of Development of JSC Lenenergo (1999-2000). Supervisory Council of JSC Sberbank. Director of the Department of Economics of Municipal Property of the Committee for the Management of Previously held positions: Finance Minister of Municipal Property of St. Petersburg (1998-1999), the Russian Federation (beginning 2004), Deputy Head of the Directorate of Investment Projects at Chairman of the Government of the Russian the Committee for the Management of Municipal Federation – Finance Minister of the Russian Property of St. Petersburg (1997-1998), economic Federation (2000-2004), First Deputy Minister of advisor to the Deputy Chairman of the Committee Finance of the Russian Federation (1997 - January for the Management of Municipal Property of St. 1999, June 1999 – May 2000), First Deputy to the Petersburg (1996-1997), investment manager of CEO of RAO UES (January – June 1999), Deputy the representative office of the Finnish banking and Director of the Administration of the President of investment company “Hansa Investment” (1995- the Russian Federation, Head of the Government 1996), director of the closed JSC project “Agency Don Accountability Office of the President of the Russian Plus” (1994–1995). Federation (1996–1997). In 2005 awarded a Certificate of Merit of the Acting State Counselor of the Russian Federation, Government of the Russian Federation for service First Class. Awarded a Certificate of Merit of the in the implementation of government social and Government of the Russian Federation in 2002, and economic policies. the order “For Service to the Fatherland, Fourth Level” in 2005. Holds no shares in VTB Bank.
Holds no shares in VTB Bank. Arkady V. Dvorkovich Member of the Supervisory Council of VTB Bank Kirill G. Androsov (since 2002) Member of the Supervisory Council of VTB Bank (since April 2007) Date of Birth: 1972
Date of birth: 1972 Education: graduated in 1984 from Moscow State 2007 VTB Annual Report
66 University, and Duke University in North Carolina, Previously held the following positions: Deputy USA. Economist and mathematician. Master of Director of the Government Apparatus of the Russian Economics. Federation (2003–2004), Head of the Financial Department of the Government Apparatus of the Holds the following positions in other organizations: Russian Federation (1999–2003), Deputy Head of the Head of the Board of Experts of the Administration of Central Board of the Federal Treasury of the Ministry the President of the Russian Federation (since April of Finance of the Russian Federation (1994–1999). 2004), member of the National Banking Board of the Bank of Russia (representative of the President of the In 2002 awarded a Certificate of Merit of the Russian Federation) (since June 2004), Chairman of Government of the Russian Federation; in 2004 the Supervisory Council of JSC Agency for Mortgage granted the title of merit “Honored Economist of the Lending and of JSC Sberbank, member of the Board Russian Federation.” Acting Counselor of State of the of Directors of JSC Transneft Shareholder’s Company Russian Federation, First Class. for Oil Transport and of the Agency for the Insurance of Deposits, a state company; President of the Guild Holds no shares in VTB Bank. of Investment and Financial Analysts, member of the Board of Directors and Board of Trustees of the Russian Economic School. Andrey L. Kostin Member of the Supervisory Council of VTB Bank Previously held the following positions: Advisor to the (since 2002) Minister, Deputy Minister of Economic Development and Trade of the Russian Federation (2001–2004), Chairman and CEO of VTB Bank (since 2002) consultant, senior expert, General Director and scientific leader of CJSC Economic Expert Group at Date of birth: 1956 the Ministry of Finance of the Russian Federation (1994–2000). Education: graduated in 1979 with honors from the Faculty of Political Economy at Moscow State Acting Counselor of State of the Russian Federation, University, specializing in international economics. First Class. Ph.D in Economics.
Holds no shares in VTB Bank. Holds the following positions in other organizations: Chairman of the Supervisory Council of VTB Bank North-West and VTB24, Chairman of the Consultative Anton V. Drozdov Committee of VTB Bank (Europe), member of the Member of the Supervisory Council of VTB Bank Board of Directors of JSC Contemporary Commercial (since 2002) Fleet, member of the Board of Directors of JSC NK Rosneft, member of the Board of Directors of JSC Date of Birth: 1964 Russian Railways, member of the Board of Directors of JSC United Aircraft Corporation, President of Education: graduated in 1986 from the Moscow the Russian Federation of Athletic Gymnastics, Financial Institute, specializing in Economics. an All-Russian Social Organization, member of the Managing Bureau of the Russian Union of Holds the following positions in other organizations: Industrialists and Entrepreneurs (Employers), Director of the Economics and Finance Department of member of the Board of the Association of Russian the Government Apparatus of the Russian Federation Banks, member of the Bureau of the Russian Union of (since April 2004). Automobile Manufacturers (since 2006). 6. Corporate Gonernance
67 Previously held the following positions: Chairman of Aleksey L. Savatyugin Vneshekonombank (1996-2002), First Deputy CEO of Member of the Supervisory Council KB National Reserve Bank (1995-1996). of VTB Bank (since 2006)
In 1999 he was awarded the Order of Merit for his Date of birth: 1970 outstanding contribution to the development of the Russian financial and banking system,; in 2006 he Education: Graduated in 1992 from St. Petersburg was awarded the Order “For Service to the Fatherland, State University, specializing in Economics. Level IV” for his outstanding contribution to the development of the financial and banking system of Holds the following positions in other the Russian Federation. organizations: Director of the Department of Financial Policy of the Ministry of Finance of the Holds shares equivalent to 0.0028% of the charter Russian Federation (since 2004), Chairman of the capital of VTB Bank. Board of Directors of JSC Rosgosstrakh, member of the Supervisory Council of JSC Agency for Mortgage Lending, JSC Rosselkhozbank, and JSC Sberbank, Yuri M. Medvedev member of the Board of Directors of GK Agency for Member of the Supervisory Council of VTB Bank Deposit Insurance. (since April 2007) Previously held the following positions: assistant Date of birth: 1948 to the Senior Instructor of the Department of Economic Theory and Economic Policy of St. Education: graduated in 1971 from the Tambov Petersburg State University (1992-2004). Institute of Chemical Machinery Construction, specializing in chemical mechanical engineering and In 2007 awarded a Certificate of Merit apparatus construction. Ph.D in Philosophy. of the Government of the Russian Federation.
Holds the following positions in other organizations: Holds no shares in VTB Bank. Deputy Director of the Federal Agency for the Management of Federal Property (since 2004) Yves-Thibault de Silguy Previously held the following positions: First Independent Member of the Supervisory Council Deputy Ministry of Property Relations of the of VTB Bank (since April 2007) Russian Federation (2000-2004), First Deputy Minister of State Property of the Russian Federation Date of birth: 1948 (1998–2000), Authorized Representative of the President of the Russian Federation in the Education: graduated in 1971 from Rennes Volgograd Region (1997–1998), Deputy Head of the University, with a law degree, in 1972 from Administration of the Volgograd Region and Chairman University Paris 1 specializing in public law. He of the Local Committee for the Management of State also graduated from the Paris Institute of Political Property (1992–1997) Studies, public service section.
Acting Counselor of State of the Russian Federation, Holds the following positions in other First Class. organizations: President of the Board of Vinci Group (since 2006), President of the Board of the Paris- Holds no shares in VTB Bank. Grignon National Agronomic Institute (since 2005). 2007 VTB Annual Report
68 Previously held the following positions: Vice Assets of the Ministry of Finance of the Russian President for International Development of Suez Federation (2004–2005), Deputy Chairman of Environment and President of the Association Vneshekonombank (1998–2004), Deputy Director of Friends of the French University of Egypt of the Department of Foreign Loans and Foreign Debt (2004–2006), President of the Commission for of the Ministry of Finance of the Russian Federation Reform of the E´cole Nationale d’Administration, (1994–1998), Second Secretary of the Permanent Ministry of Civil Service (2003–2006), Director Representation of the USSR, later of Russia, at for International Affairs and European Affairs the Department of the UN and other international and Corporate Relations at Suez (2001–2006), organizations (1988–1994). Member of the Executive Committee of Suez- Lyonnaise des Eaux. (2000–2006), European Awarded a medal of the order “For Service to the Commissioner responsible for economic, monetary Fatherland, Level II,” and in 2007, awarded the Order and financial affairs (1995–1999), Secretary- of Friendship. General of the Interdepartmental Committee for Questions of Economic Cooperation in Europe and, Holds shares equivalent to 0.0009% of the charter simultaneously, Advisor on European Affairs and Vice- capital of VTB Bank. Sherpa (preparation of the Summits of industrialized nations) of the Cabinet of the Prime Minister of France (1993–1995), Head of the Directorate of Aleksey V. Ulyukaev the Usinor Sacilor Group for International Affairs Member of the Supervisory Council of VTB Bank (1988–1993), Technical Advisor on European Affairs (since 2002) and International Economic and Financial Affairs under the Cabinet of the Prime Minister of France Date of birth: 1956 (1986–1988), Counselor on Economic Affairs at the French Embassy to the USA (1985–1986). Education: graduated in 1979 from the Economics Faculty of Moscow State University. Doctor of Holds no shares in VTB Bank. Economics.
Holds the following positions in other organizations: Sergey A. Storchak First Deputy Chairman of the Central Bank of the Member of the Supervisory Council of VTB Bank (since Russian Federation (since 2004), member of the 2004) Consultative Committee of VTB Bank (Europe) and member of the Supervisory Council of VTB Bank Date of birth: 1954 (France), member of the Supervisory Council of JSC Russian Bank of Development, Deputy Chairman of Education: graduated in 1981 from the Moscow State the Supervisory Council of JSC Sberbank. University of International Relations, specializing in international economic relations. Ph.D in Economics. Previously held the following positions: First Deputy Minister of Finance of the Russian Federation Holds the following positions in other organizations: (2000-2004), Deputy Director of the Institute of Deputy Minister of Finance of the Russian Federation Economics of the Transition Period Fund (1999-2000), (since 2005). Delegate of the Moscow City Duma (1996-1998).
Previously held the following positions: Director Acting Counselor of State of the Russian Federation, of the Department of International Financial First Class. In 2001 awarded a Certificate of Merit of Relations, Government Debt and State Financial the Government of the Russian Federation; in 2004 6. Corporate Gonernance
69 granted the title of merit “Honored Economist of the Dmitry B. Aratsky; Russian Federation”; in 2006 awarded the Order of Andrey V. Sharonov. Merit.
Holds no shares in VTB Bank. Dmitry B. Aratsky Member of the Supervisory Council of VTB Bank (from 2004 through April 2007) Matthias Warnig Date of birth: 1964 Independent Member of the Supervisory Council of VTB Bank (since April 2007) Education: graduated in 1986 from Lobachevsky Gorkovsky State University (now the Lobachevsky Date of Birth: 1955 Nizhny Novgorod State University), and in 1997 from the Volgo-Vyatskaya Academy of State Service. Ph.D Education: in 1981, graduated from the Higher in Technical Sciences and Doctor of Economics. School of Economics (Berlin). Holds the following positions in other organizations: Holds the following positions in other organizations: Deputy Minister of Regional Development of the Managing Director of Nord Stream AG, Switzerland Russian Federation (since 2007), member of the (previously Northern European Gas Pipeline) (since Supervisory Council of JSC Agency for Mortgage 2006). Lending, JSC Rosselkhozbank and JSC Russian Bank of Development, member of the Boards of Directors Previously held the following positions: Chairman of JSC Sokol and JSC Sheremetyevo International of the Board of Directors of CJSC Dresdner Bank Airport. (2005–2006), Chairman of the Managing Committee of Dresdner Kleinwort for Russia and the CIS Previously held the following positions: Deputy (2004–2005), President of CJSC Dresdner Bank Director of the Federal Agency for the Management of (2002–2004), Head Coordinator of the Dresdner Bank Federal Property (2004–2007), First Deputy Minister Group in Russia (2000-2002), General Director of of Property Relations of the Russian Federation the St. Petersburg office of BNP-Dresdner Bank (later (2000–2004), Chairman of the Committee for Land renamed ZAO Dresdner Bank) (1999–2000), Deputy Resources and Land Development of the Nizhny Director of the Moscow Branch of BNP-Dresdner Novgorod Region (1997–2000). Bank (1997–1999), service in the Ministry of Foreign Trade and later in the Cabinet of Ministers of the Holds no shares in VTB Bank. German Democratic Republic, employee of the Main Intelligence Directorate (1981–1990). Andrey V. Sharonov Holds no shares in VTB Bank. Member of the Supervisory Council of VTB Bank (from 2004 through April 2007) Changes in the Supervisory Council of VTB Bank in 2007 Date of birth: 1964
In April 2007, based on the decision of a special Education: graduated in 1986 from the Aviation General Shareholders Meeting, the number of members Institute (city of Ufa), and in 1996 from the Russian of the Supervisory Council of VTB Bank was increased Academy of State Service. Ph.D in Sociology. to 11. The following persons resigned their authorities as members of the Supervisory Council of VTB Bank: Holds the following positions in other organizations: 2007 VTB Annual Report
70 member of the boards of directors of JSC AK Transneft, (independent member of the Supervisory Council of JSC Russian Railways and JSC Aeroflot Russian VTB Bank); Airlines, Managing Director of the Troika Dialog Group Aleksey L. Savatyugin – Committee Member (member of Companies (since July 2007). of the Supervisory Council of VTB Bank); Aleksey V. Ulyukaev – Committee Member (member Previously held the following positions: Secretary of of the Supervisory Council of VTB Bank). State and Deputy Minister of Economic Development and Trade of the Russian Federation (1997–2007), The exclusive functions of the Audit Committee are: Director of the Department of the Ministry of Economics of Russia (1996–1997), Chairman of the evaluating the candidates to become the Bank’s Committee of the Russian Federation on Youth Affairs External Auditor; (1992–1996). assessing the conclusions of the Bank’s auditor; assessing the effectiveness of the Bank’s internal Holds no shares in VTB Bank. control procedures and, where necessary, advise on preparing proposals for their improvement. The following persons were elected to the Supervisory Council of VTB Bank in 2007: In 2007 one meeting of the Audit Committee in praesentia and six meetings by absentee vote Kirill G. Androsov; were held. Yuri M. Medvedev; Matthias Warnig (independent director); Over the course of 2007 the Audit Committee Yves-Thibault de Silguy (independent director) examined the following issues:
The acting membership of the Supervisory Council the approval of the draft consolidated financial was elected by the decision of the annual General reporting of VTB Bank according to IFRS for nine Shareholders Gathering of VTB Bank, which took months of 2007; place on June 20 2007. There were no changes in its adoption of the Work Plan for the Audit Committee composition. for the period from July 1, 2007 through June 30, 2008; The Audit Committee the approval of the report of the controller’s report on the professional activity of VTB Bank on the In April 2007 the Supervisory Council created the securities market for the second and third quarters Audit Committee for the analysis and support of an of 2007; effective and adequate system of internal control in examining the reports of the Bank’s Internal the Bank. Control Department; approval of the plan for organizing the work of VTB The Audit Committee is comprised of members of Group’s internal control/audit units, in Russia and the Supervisory Council with professional experience abroad; and expertise in internal control, audit, finance, the approval and submission to the Bank’s accounting and the management of financial Supervisory Council for confirmation of a Work institutions. Plan for the Bank’s Internal Control Department for 2008. As of January 1, 2008 the Audit Committee was acting with the following membership: The Audit Committee submits a yearly report to the Supervisory Council on its Matthias Warnig – Committee Chairman performance. 6. Corporate Gonernance
71 The Management Board exceeds 5 percent of the charter or joint-stock capital (property) of the legal entity; The Bank’s Management Board is the collegial taking decisions on the opening of additional offices executive body of the Bank, carrying out, along with and cash transaction service desks of VTB Bank; the one-man executive body, the Chairman and CEO determining the information to be treated as a of the Bank’s Management Board, the leadership of commercial secret, and determining the procedures the current activity of the Bank with the exception within VTB Bank for working with information that of questions referable to the competency of the represents a commercial secret; General Shareholders Meeting or the Supervisory approval of regulations on branches and Council of the Bank. The Bank’s executive bodies representation offices of the Bank as well organize the execution of the decisions of the General regulations on the working collegial bodies of the Shareholders Meeting and the Supervisory Council of Bank and internal departments of the Bank; the Bank. appointing the candidates for the positions of managing directors and chief accountants of the The executive bodies are accountable to the General branches; Shareholders Meeting and the Supervisory Council of approval of a branch standard organizational the Bank. structure and a branch’s employees remuneration system; The activity of the Chairman and CEO of the Bank’s confirming the results of VTB Bank’s activity for the Management Board and the members of the Bank’s reporting period, and taking decisions on rewarding Management Board is regulated by the Russian bonuses to the Bank’s employees; Federation legislation, the Bank’s Charter, the examining reports on the work of the structural units Regulations on the Management Board, other internal of VTB Bank; documents of the Bank and agreements concluded by confirming VTB Bank’s budget; each of these with VTB Bank. writing off bad debts on loans not exceeding USD one million per debtor from the balance sheet of the Main Functions Bank, charging the loss to loan-loss provisions.
The Management Board of VTB Bank performs the Management Board Membership following main functions: The formation of the Bank’s executive bodies enforcement of the decisions of the AGM and the and the preterm cessation of their authorities is Supervisory Council of the Bank; carried out by decision of the Bank’s Supervisory creating conditions necessary for the functioning of Council. The size and composition of the the AGM, the Supervisory Council and the Statutory Management Board are determined by the Audit Commission of the Bank; Supervisory Council. reviewing financial reporting of VTB Bank; deciding on publication of the financial statements The term of authority of the Chairman and CEO in accordance with the international accounting and other members of the Management Board standards; is also determined by decision of the Bank’s deciding on the Bank’s participation in legal Supervisory Council concerning the formation of entities (with the exception of participation in the Bank’s executive bodies, but may not exceed holding companies, financial and industrial groups, five years. and associations of other united commercial organizations), if the amount of the Bank’s As of January 1, 2008 VTB Bank’s Management participation (the sum of its proprietary investment) Board is represented by the following members: 2007 VTB Annual Report
72 Andrey L. Kostin Holds shares equivalent to 0.0008 % of the charter Chairman and CEO of VTB Bank (since 2002) capital of VTB Bank.
Member of the Supervisory Council of VTB Bank (since 2002) Olga K. Dergunova Member of the VTB Bank Management Board A more detailed biography of Mr. Kostin is (since June 2007) presented in the section “The Supervisory Council,” on pages 73. Date of birth: 1965
Education: graduated in 1987 from the G. V. Plekhanov Yulia G. Chupina Institute of National Economy in Moscow, specializing in Deputy Chairman and CEO of the VTB Bank economic cybernetics; economist and mathematician. Management Board (since June 2007) Holds the following positions in other organizations: Member of the VTB Bank Management Board member of the Supervisory Council of VTB24, member of (since September 2005) the Board of directors of VTB Insurance.
Date of birth: 1970 Previously held the following positions: Head of the Moscow representative office of Microsoft Airland Education: graduated in 1993 with honors from Operations Ltd. (1999-2004), General Director of the Moscow State University of the Order of the OJSC Microsoft Rus, President of Microsoft Russia and Friendship of Peoples, specializing in foreign CIS in the Department of Strategic Development of languages and in 1997 received an MBA in the Higher OJSC Microsoft Rus (December 2004-June 2007). School of Administration and Company Mana gement in Barcelona (Spain) with an MBA at Leonard Stern Joined VTB Bank in 2007. Business School, New York University, USA. Holds no shares in VTB Bank. Holds the following positions in other organizations: member of the Supervisory Councils of VTB24, VTB Bank North-West, VTB Bank (Austria), VTB Bank Vadim O. Levin (Ukraine), member of the Board of Directors of VTB First Deputy Chairman and CEO of VTB Bank Insurance, member of the Consultative Committee (since 2002) of VTB Bank (Europe), member of the Supervisory Council of VTB Bank (France). Date of birth: 1963
Previously held the following positions: Junior Education: graduated in 1985 from the Leningrad Consultant, Senior Consultant, Project Manager at Financial and Economic Institute, specializing in Moscow Representative Office of MacKenzie and economic cybernetics. Ph.D in Economics. Company Inc. FSU (1998–2004). Holds the following positions in other organizations: Joined VTB Bank in 2004. Since then held the Chairman of the Supervisory Council of JSC AKB positions of Vice President, Vice President - Head Evrofinans Mosnarbank, member of the Supervisory of Corporate Development Department, Senior Council of VTB24, Bank VTB Bank North-West and VTB Vice President – Head of Corporate Development Bank (Georgia), member of the Board of Directors of the Department. Russian Commercial Bank (Cyprus). 6. Corporate Gonernance
73 Previously held the following positions: Deputy Andrey S. Puchkov Chairman of Vneshekonombank (1997-2002), head Member of the VTB Bank Management Board of the liabilities operations division, Deputy Branch (since June 2007) Director, Branch Director (1994-1997) of the St. Petersburg branch of Imperial Bank. Date of birth: 1977
Joined VTB Bank in 2002. Education: graduated in 1998 from the Law Faculty of the M. V. Lomonosov Moscow State Holds shares equivalent to 0.0011% of the charter University. Lawyer. capital of VTB Bank. Holds the following positions in other organizations: Chairman of the Board of Evgeny V. Novikov Directors of the Russian Commercial Bank Member of the VTB Bank Management Board (Cyprus), Chairman of the Supervisory Council of (since June 2007) VTB Capital, member of the Supervisory Council of VTB Bank (Ukraine), VTB Bank (France), Date of birth: 1966 VTB24 and VTB Bank North-West, member of the Consultative Committee of VTB Bank (Europe). Education: graduated in 1989 from the M. I. Kalinin Polytechnical Institute in Leningrad, specializing Previously held the following positions: in robotic technical systems and in 2002, from member of the Moscow Bar Association the Northwestern Academy of State Service, (1999–2002), economist and legal consultant specializing in finance and credit. Economist. in the central economics department of the Central Bank of the Russian Federation Holds the following positions in other (1996–1997). organizations: member of the Exchange Board (Board of Directors) of CJSC St. Petersburg Currency Joined VTB Bank in 2002. Since then held Exchange (since May 2007). the following positions at VTB Bank Legal Department: Deputy Head of the Department, Previously held the following positions: Leading Head of the Department, Vice President – Head Expert of the Expert Group of the Lending of the Department, Senior Vice President – Committee, Consultant, Leading Consultant of Head of the Department, Senior Vice President. the Division of Asset and Liability Management, Deputy Head of the Division of Financial Planning, Holds shares equivalent to 0.0006% of the Deputy Head of the Board of Financial Planning charter capital of VTB Bank. and Control, Head of the Board of Banking Risks, and Head of the Directorate of Bank Asset and Liability Operations Management at JSC Industrial Gennady V. Soldatenkov and Construction Bank (1998–2003), Deputy CEO Deputy Chairman and CEO of the VTB Bank of JSC Industrial and Construction Bank/Bank VTB Management Board (since 2001) Bank North-West (November 2003 – June 2007). Date of birth: 1952
Joined VTB Bank in 2007. Education: graduated in 1975 with honors from the Moscow Financial Institute, specializing in Holds no shares in VTB Bank. finance and credit. 2007 VTB Annual Report
74 Holds the following positions in other organizations: of Vneshekonombank USSR (1998–2002), Deputy Deputy Chairman of the Supervisory Council of VTB General Director of AOOT All-Russian Automotive Alliance Bank (Deutschland) AG, member of the Exchange (1996–1998). Board of the Moscow Stock Exchange Non- Commercial Partnership, member of the Presidium of Joined VTB Bank in 2002. the Moscow Chamber of Trade and Industry. Holds shares equivalent to 0.0008% of the charter Previously held the following positions: Deputy capital of VTB Bank. Chairman of the Management Board of JSC Sberbank (1996-2001), Chairman of the Moscow Bank of Sberbank of the Russian Federation (1991-2001). Nikolai V. Tsekhomsky Member of the VTB Bank Management Board Joined VTB Bank in 2001. (since June 2007)
Holds shares equivalent to 0.0023% of the charter Date of birth: 1974 capital of VTB Bank. Education: graduated in 1996 from the St. Petersburg State Academy for Engineering and Economics. Vasily N. Titov Ph.D in Economics since 1999. Deputy Chairman and CEO of the VTB Bank Management Board (since 2007) Holds the following positions in other organizations: member of the Supervisory Councils of VTB24, VTB Bank Member of the VTB Bank Management Board North-West and VTB Bank (Ukraine), member of the (since 2004) Consultative Committee of VTB Bank (Europe), member of the Supervisory Councils of INTERPIPE Limited, Date of birth: 1960 CJSC VTB-Invest.
Education: graduated in 1983 from the A. A. Zhdanov Previously held the following positions: Financial Leningrad State University, and in 2002 from the Director, Vice President of Finance and Vice President Financial Academy of the Government of the Russian of Finance and Investments in JSC Mobile Telesystems Federation. Economist. (2002–2005), Financial Director of the Renaissance Capital Investment Group (1999–2002), Financial Holds the following positions in other organizations: Comptroller at Brunswick UBS Warburg Investment Bank member of the Supervisory Councils of VTB Bank (Moscow) (1998–1999), senior auditor at Ernst and (France) and VTB Bank (Ukraine), member of the Young (1996–1998). Board of Directors of CJSC Almaz-Press, member of the boards of directors of CJSC Interfax-China, OJSC Joined VTB Bank in 2005 as Senior Vice President Interfax-AKI and JSC All-Russian Automotive Alliance, and CFO. member of the Supervisory Council of JSC AVTOVAZ and CJSC AKB Automotive Bankers House. Holds shares equivalent to 0.0001% of the charter capital of VTB Bank. Previously held the following positions: Deputy Director of the Administrative Department, Director Changes in the VTB Bank Management Board in 2007 of Foreign and Public Relations, Head of the Department of Information and Foreign Relations of In June 2007 the following members left the Vneshekonombank, member of the Board of Directors Management Board: 6. Corporate Gonernance
75 Aleksey I. Akinshin; Education: graduated in 1986 from the S. Igor N. Zavyalov; Ordzhonikidze Moscow Aviation Institute, Vasily V. Kirpichev; specializing in economics and the organization of Konstantin G. Kozhevnikov; production. Erkin R. Norov. In 2007 held the following positions in other organizations: Chairman of JSC Bank Broker, Aleksey I. Akinshin Chairman of the Supervisory Councils of CJSC Deputy Chairman of the Management Board Vneshtorgbank (Ukraine) and VTB Bank (Ukraine), of VTB Bank (from December 2004 VTB Bank (France), VTB Bank (Austria), and through 2007) Euroleasing GmBH; Chairman of the Board of Directors of CJSC Rosspetsstal, VTB-Leasing and VTB Member of the VTB Bank Management Board Insurance, member of the Board of Directors of VTB24 (from July 2003 through 2007) and JSC KAMAZ.
Date of birth: 1959 Previously held the following positions: Deputy Chairman of Vneshekonombank (1999-2000), Deputy Education: graduated in 1982 from the Moscow CEO of KB National Reserve Bank (1998-1999), Financial Institute, specializing in international Head of the Board of Development of Relations with economic relations. Mechanical Engineering Businesses at AB Inkombank (1998). In 2007 he occupied the following positions in other organizations: member of the Supervisory Holds shares equivalent to 0.0028 % of the charter Council of VTB Bank North-West, member of the capital of VTB Bank. Board of Directors of CJSC MICEX and CJSC MICEX Stock Exchange, member of the Board of CRO National Securities Market Association. Vasily V. Kirpichev Senior Vice President of VTB Bank (2005-2007) Previously held the following positions: Vice President, later Senior Vice President of Member of the VTB Bank Management Board VTB (2002–2003), held various positions in (from November 2005 through 2007) Vneshekonombank (1996–2002), Deputy Chairman of the Management Board – Head of the Credit and Date of birth: 1972 Economic Division of the Russian-German Trade Bank (1994–1996). Education: graduated in 1995 from the St. Petersburg University of Economics and Finance, specializing in Holds no shares in VTB Bank. finance and credit.
Igor N. Zavyalov In 2007, held the following positions in other Deputy Chairman and CEO of VTB Bank organizations: member of the Supervisory Council (from July 2002 through 2007) of JSC Bank Broker, member of the Consultative Committee of VTB Bank (Europe), Board Member of Member of the VTB Bank Management Board CRO National Securities Market Association. (from July 2002 through 2007) Previously held the following positions: held Date of birth: 1960 various positions at Vneshekonombank including 2007 VTB Annual Report
76 the position of Deputy CEO of Vneshekonombank from the Academy of National Economy of the (1998–2005) Government of the Russian Federation. Ph.D in Economics. Holds no shares in VTB Bank. In 2007, held the following positions in other organizations: Senior Vice President, Director of the Konstantin G. Kozhevnikov Department of Control of Lending Operations and Member of the VTB Bank Management Board Risks at VTB Bank. (from July 2005 through 2007) Previously held the following positions: Director Date of birth: 1967 of Development and Strategic Planning, member of the Board of Directors at Vneshekonombank Education: graduated in 1990 from the State Central (1999-2002), Department Director at the Ministry Institute of Physical Culture of the Order of Lenin, and of the Russian Federation of Taxes and Collections in 2000 from the Russian Academy of State Service of (1999); held various positions at JSC AVTOVAZ the President of the Russian Federation. Candidate of (1992-1999). Economics. Holds no shares in VTB Bank. In 2007 held the following positions in other organizations: Chairman of the Board of Directors The following persons were elected to the of CJSC Almaz-Press and VTB-Invest, member of the Management Board of VTB Bank: Board of Directors of East-West United Bank S.A., JSC Aviadvigatel, OJSC Interbank Trading House, Olga K. Dergunova; President of the “Russian Golf Association Russia- Evgeny V. Novikov; Wide Social Organization. Andrey S. Puchkov; Nikolai V. Tsekhomsky. Previously held the following positions: Vice President of the Banking Board and Deputy CEO of Results of the Work of the Management Board AB Cooperation with Social Initiatives (2001–2004), of VTB Bank in 2007 President of the Energoresursosberezhenie Non- Commercial Partnership (1999–2001), Vice President In 2007, 69 meetings of the Bank’s Management of the Economic Politics Fund (1998–1999), held Board took place, dedicated to various issues that fall various positions in the Administration of the within its competency. President of the Russian Federation (1997–1998).
Holds no shares in VTB Bank. The President — CEO
The Bank’s Chairman and CEO is a sole executive Erkin R. Norov body, carrying out, in conjunction with the Member of the VTB Bank Management Board Management Board, the management of the Bank’s (from July 2002 through 2007) current operations with the exception of questions assigned to the competency of the General Date of birth: 1954 Shareholders Meeting or the Supervisory Council of the Bank. Education: graduated in 1976 from the M. V. Lomonosov Moscow State University, and in 2001 6. Corporate Gonernance
77 The term of office of the Chairman and CEO is The Group Management determined by the decision of the Supervisory Committee (GMC) Council of the Bank on the formation of the Bank’s executive bodies and may not exceed five years. The development of VTB Group is an extremely Since June 2002 the duties of the Chairman and complex process that demands the concentrated CEO have been performed by Andrey L. Kostin. In efforts of many specialists and the competent April 2007 he was once again reelected for this organization of cooperation among all Group position for the period ending June 2012. participants. As a result of the need for an interbank consulting and coordinating body, in 2006, on the Mr. Kostin’s biography can be found in the sections basis of an informal agreement of the financial “The Supervisory Council” and “The Collegial establishments that make up VTB Group, the Group Executive Body – The Management Board” on Management Committee (GMC) was created. pages 73 and 78. The GMC is headed by the Chairman and CEO of Remuneration the Bank, Andrey Kostin. The GMC is made up of a number of members of the Management Board and By decision of the AGM remuneration may be top managers of VTB Bank, as well as the directors paid out to members of the Supervisory Council of other financial establishments that make up the of VTB Bank during the period of the performance Group. of their duties and/or compensation may be made for expenses of members of the Supervisory As of January 1, 2008 the Management Committee of Council connected with the performance of their VTB Group consisted of: functions. The amounts of such remunerations and compensation are fixed by the AGM. Andrey L. Kostin (Chairman of the GMC, Chairman and CEO of VTB Bank, member of the Supervisory Council In 2007 members of the Supervisory Council of of VTB Bank); VTB Bank weren’t paid any remuneration. Yulia G. Chupina (Deputy Chairman and CEO of VTB Criteria for the determination of the amount Bank, member of the Management Board of VTB of remunerations and compensations of the Bank); members of the VTB Bank Management Board fall under the competency of the Supervisory Olga K. Dergunova (member of the Management Council. The salary levels and amounts of bonus Board of VTB Bank); remunerations are reflected in the employment contracts of the members of the Management Evgeny V. Novikov (member of the Management Board Board. Payment of salary, including bonuses, of VTB Bank); is carried out in accordance with the Russian Federation legislation. Andrey S. Puchkov (member of the Management Board of VTB Bank); In 2007 remuneration of RUB 480.9 million was paid out to members of the Management Board. Nikolay V. Tsekhomsky (member of the Management Board of VTB Bank);
Nikolay A. Kuznetsov (Senior Vice President of VTB Bank); 2007 VTB Annual Report
78 Valery V. Lukyanenko (Senior Vice President of VTB support of the development of corporate business; Bank); planning, budgeting and formation of management reporting; Mikhail M. Zadornov (Chairman and CEO of VTB24); internal control and audit; personnel management; Vadim V. Pushkarev [CEO of VTB Bank (Ukraine)]. management of the system of brands and marketing communications; In 2007 the authority of the following persons as internal control with the aim of preventing the members of the GMC ceased: legalization of criminal income and the financing of terrorism; Aleksey I. Akinshin; developing business with financial Igor N. Zavyalov; establishments; Vasily V. Kirpichev; asset and liability management; Erkin R. Norov; risk management. Igor G. Suvorov; Evgeny M. Grevtsev. The areas will be expanded and supplemented as necessary. As a rule, the commissions are made The following joined the GMC: up of experts and specialists from each of the banks that make up the Group. Olga K. Dergunova; Evgeny V. Novikov; In 2007 two meetings of the Group’s Management Valery V. Lukyanenko; Committee were held. Vadim V. Pushkarev. The results of the past year have demonstrated the The GMC’s responsibilities are: effectiveness of the GMC’s work as an instrument and unified platform for the consideration of the the efficient development of the Group; most important issues of the activity of VTB Bank, an increase in the efficiency of cooperation among its affiliated companies and VTB Group as a whole. the credit organizations that make up the Group, In connection with this, in 2008 it is planned to and the maximum use of its competitive advantages, hold meetings of the GMC on a regular basis (no including the attraction of new clients and the less often than twice a month). expansion of the product line offered; an acceleration of the Group’s growth and an The Bank is currently reviewing the functioning of increase of its market value, through the maximum the GMC to see how it can be made more effective use of the potential of each of its members and the as a forum for debating key management issues improvement of the Group’s customer service; and improving decision-making. the optimization of internal processes, with the aim of finding and using the best practices applied by the financial establishments, which make up the Group. Decisions taken by the Committee are of a recommendatory nature.
In the framework of the GMC, coordinating commissions, were created for work on the following functional areas: 7. Sustainable development 79
7.1. Charity and VTB seeks to participate in projects that promote sponsorship the image of the Bank as a powerful, innovative, successful and transparent organization
The objective of every successful company is VTB also sponsors exhibitions and conferences, often consistent and effective business development, on at the request of client divisions. the one hand, and on the other hand, the support of social values, the country’s cultural and scientific Culture and the arts heritage, and socially disadvantaged population groups. Following its tradition of supporting projects in the area of culture and the arts to support the As a leader on the Russian banking market, VTB preservation and development of Russian culture understands the need to provide far-reaching and, as part of its long-standing partnership with support in the areas of culture and the arts, sport the State Tretyakov Gallery, VTB Bank sponsored and physical fitness, education and healthcare. the “Europe – Russia – Europe” exhibition organized in honor of the 50th anniversary of In 2007 VTB considered over 2,000 requests the creation of the European Union. The main for sponsorship and charitable assistance. The idea behind the exhibition was to show the Bank decided to participate in 90 sponsorship distinctiveness and mutual interaction of European packages and to provide financial assistance to cultures. 147 cultural, healthcare, educational and sporting institutions, religious organizations and veterans Assistance was also provided for the Gallery’s committees. exhibition and publishing activity, acquisition of collections and for work to implement modern Decisions on the provision of charitable assistance technology in all areas of its activity. are taken collectively. The Charity Committee oversees this area of activity at VTB. The Bank also helped the Pushkin Museum of Fine Arts to hold an exhibition of the works of one of The guiding principles used by Committee members the most famous Italian artists of the late 19th and when considering the requests of legal entities for early 20th centuries, the Expressionist Amedeo financial assistance are: Modigliani.
аtargeted nature; Furthermore, in 2007 VTB assisted the Russian social significance; Museum in purchasing exhibition equipment possibility for long-term cooperation. for the public fund 20th century sculptures, allocated funds to the State Hermitage museum VTB sponsors events of national and international in St Petersburg for restoration of the General importance. Sponsorship can be split into two Staff Building and supported the restoration of categories – projects aimed at improving the Bank’s the unique Koktebel environmental, historical and image and campaigns to win clients. cultural reserve “M.A. Voloshin’s Kimmeria”. 2007 VTB Annual Report
From achievements to success achieving the goals set + ability to see the new ones
2007 VTB Annual Report
82 Cinema and television in the Great Hall of the Moscow Conservatory and the Moscow International Performing Arts To assist in promoting the development of Center, allocated funds for the 13th World Cup of Russian cinematography and television, VTB Latin Dance among Professionals and assisted continued to work actively with the fund Academy the St. Petersburg State Academic Ballet Theater, of Russian Television (ART), acting as the official directed by Boris Eifman, the Russian Fund of Partner of the Russian national television Early Music and a number of other organizations. competitions TEFI and TEFI-Region organized by ART. The Bank also supported the International Cultural Enlightenment Union “Russian Club” The Bank also provided financial support to the (Georgia) in 2007, allocating donations for the project of the Kultura television channel for the publication of the monthly magazine of the same creation of a 10-part documentary film to mark the name, staging of a performance of “Dreams of 200th anniversary of the birth of Nikolai Gogol. Georgia” based on the works of Russian poets, and holding of meetings between Georgian and Russian poets and the publication of an art book Being one of the leaders of the Russian banking market, VTB “Russian Architects in Georgia”. bank is committed to the large-scale support of society. Education and Science
In 2007 VTB acted as a partner to the “Russian Last year assistance was given to the Ivanovo Evening in Milan”, devoted to showing Russian E.D. Stasovoi Boarding School “Interdom”, the Finance national cinematography in Italy. Academy under the Government of the Russian Federation, the Rostov Cadet Boarding School Danila The premiere showings of the major Russian Efremov Aksaisky Cossack Cadet Corps, the State historical cinema project “1612”, of which VTB Academy of Slavic Culture and other organizations. was the official sponsor, were held in November 2007. The film’s director, Vladimir Khotinenko, VTB also supported the State University – Higher turned his attention to the events of the Time of School of Economics and financed the holding Troubles, a period during which Russia was first of the VIII International Scientific Conference established as sovereign entity. “Modernization of the Economy and Social Development”. Theater VTB Bank grants were allocated for the 2007–2008 Continuing its partnership with the Mariinsky academic year to the brightest students and Theater, VTB acted as the general sponsor of graduate students at Moscow State Institute for the VII International Mariinsky Ballet Festival in International Relations (MGIMO), Lomonosov Moscow St. Petersburg. In addition, the Bank helped stage State University, the Finance Academy under the the opera Tosca by Giacomo Puccini. Government of the Russian Federation, the State University – Higher School of Economics, Baltic State VTB Bank is a trustee of the Bolshoi Theater, and Technical University, St. Petersburg State University of assisted in the performance of a number of the Economics and Finance and a number of other higher theater’s projects in 2007. education institutions.
Last year VTB supported the international festival In 2007 VTB acted for the third time as the General “Vladimir Spivakov presents…”, which was held Sponsor of the International Competition of Bank VTB 2007 Annual Report
116 Full name VTB Bank (open joint-stock company)
Abbreviated name JSC VTB Bank
Legal address ul. Bolshaya Morskaya 29, St. Petersburg 190000
Postal address ul. Plyushchikha 37, Moscow 119121
Date of registration 17 October 1990
Integrated directory service 8-800-200-77-99, (495) 739-77-99
Fax (495) 258-47-81
E-mail [email protected]
Website www.vtb.ru, www.vtb.com
Public Relations Department (495) 783-17-17, [email protected]
Investor Relations Department (495) 775-71-39, [email protected]
SWIFT VTBRRUMM VTBRRUMM SEC VTBRRUMM CSD (depository)
TELEX 412362 BFTR RU
Teletype: 114624 KRINUM
SPRINTMAIL: PROTOCOL/MOSVTB0/CEA
Reuters Dealing Code – securities operations VTBP
Reuters Dealing Code – deposit and financial operations in a foreign currency, interbank loans and deposits in roubles VTBR
Reuters Dealing Code – conversion operations on the internal and external foreign exchange market VTBX
BIK 044525187
TIN 7702070139 7. Sustainable development
83 Scientific and Educational Projects “Energy for the which was dedicated to the 60th birthday of the Future – 2007”, aimed at finding gifted youth who legendary trainer, who has trained 11 Olympic figure are interested in a professional career in the atomic skating champions. energy industry. The Bank traditionally supports the KAMAZ-Master The Bank provided support to the Institute of World rally team, having been its official partner for many History of the Russian Academy of Sciences for the years now. The sponsorship assistance to the Russian organization and holding of the Russian-French crew, which has repeatedly taken top honors in the summer school “Civil Society in Russia and Europe: legendary Paris-Dakar rally, is a logical extension of Formation, Development, Prospects”, to the Russian the partnership between the Bank and JSC KAMAZ – State Humanitarian University for the development the leading Russian truck manufacturer. of new educational programs, implementation of the “Russian Studies” scientific and educational program In 2007 VTB supported the International Association and to the Support Fund of Baltic State Technical of Athletics Foundations (IAAF), having allocated University for repair of auditoriums. funds for international track and field meetings, in particular the 11th IAAF World Championship Sport in Osaka (Japan) and the 5th World Track Finals in Stuttgart (Germany). VTB has traditionally held an active social position, providing support to Russian sportsmen who The Bank allocated funds for the Sports and represent our country on the world stage. Over Basketball Club “Sport All Around” for the the past few years the Bank has been working organization and holding of a Youth Festival in successfully with the Russian Olympic Committee, Moscow. the Figure Skating Federation of Russia, and is the sponsor of several clubs, including the professional VTB is financing a number of projects, including the football club CSKA and the professional hockey club financing of construction of hotels, as part of the of the Ministry of Internal Affairs. preparations for the Sochi Olympics in 2014.
The Russian Football Union is a long-time partner of Healthcare VTB. In 2007 the Bank supported the holding of the international tournament “Champions Cup of the For several years the Bank has been implementing Commonwealth of Independent States and the Baltic the corporate charity program “World Without Tears”, States – 2007”. which is a long-term, targeted project aimed at supporting children’s healthcare institutions. Under Volleyball is the second most popular and this program VTB has presented special equipment to widespread sport (behind football) with professional the oncohematological ward of the Russian Children’s leagues in Europe. Our longstanding partnership with Clinical Hospital – an automated station for preparing the Volleyball Federation of Russia continued in the cytological drugs for genetic research and a B.Braun reporting year. VTB Bank allocated funds for training Space infusion apparatus. of the Russian men’s national volleyball team and for participation in the competitions held as part of the In December 2007 the Children’s Charity Fund “Give 2007 season. The Bank also provided support to the Life” received donations from VTB Bank for treatment Russian Golf Association. of children with oncohematological diseases.
Last year VTB became the General Sponsor of the ice VTB presented St. Petersburg N.F. Filatov Children’s skating show “Tatiana Tarasova and her Students”, Infectious Diseases Hospital No. 5 with endoscopic 2007 VTB Annual Report
84 equipment, which makes it possible for the hospital’s the Russian National Public Organization for the doctors to provide their small patients with timely Blind, Handicapped Persons and Pensioners of the and effective non-intrusive treatment. Southern Administrative District of Moscow; the Interregional Public Organization for Disabled Children’s Municipal Clinical Hospital No. 9 (Moscow) Veterans of War and the Armed Forced of Russia; also received a unique gift from VTB – a urodynamics the Russian National Public Organization of system. In the hands of experienced doctors this Handicapped Persons Football Federation for equipment opens numerous opportunities for non- Handicapped Persons of Russia. intrusive operations in the area of children’s urology and surgery. Donations to religious organizations
VTB Bank also provided assistance to the following VTB donated funds and provided financial support medical institutions in 2007: The Prizvanie charity to many religious organizations in 2007, including: support fund for medical achievements (allocated funds for the organization and holding of the the local Russian Orthodox religious organization awards ceremony of the Prizvanie National Award Parish of the Feodorovskaya Icon of the Madonna for the best doctors in Russia), FGU Central Clinical of the St. Petersburg Diocese of the Russian Orthodox Military Hospital of the FSS of Russia, the Moscow- Church – donations for performance of most urgent based charity fund “Be Healthy” (donations for work for the restoration of the Cathedral; the implementation of charity programs to help the Associazione Santa Caterina Protomartire – handicapped children, ANO First Hospice for Children donations for the construction of a church to Holy with Oncological Diseases and other organizations. Catherine the Martyr in Rome; the religious organization Smolensk Parish of the Support for veterans Church of Holy New Russian Martyrs of the Smolensk- Kaliningrad Diocese of the Russian Orthodox An important area of VTB’s charity activity is support Church – donations to pay for construction work of veterans of war, labor and the Armed Forces on the restoration of the Parish Church of Holy New and disabled persons. In 2007 the Bank provided Russian Martyrs; charitable assistance to: the Russian Orthodox religious organization Nikolo- Ugreshsky Stauropegion Monastery, Russian the Ramensky branch of the International Fund of Orthodox Church in Moscow oblast – donations for Slavic Literature and Culture – for the needs of the painting of frescoes in the Transfiguration of the 100th Guardian Svirskaya Order of the Red Banner Savior Cathedral; Airborne Division; the local religious organization Community of Old the Moscow Care Facility for Veterans (Pensioners) of Believers of Orekhovo-Zuevo, Moscow oblast, of War and the Armed Forces – assistance for veterans the Russian Orthodox Church of Old Believers – in honor of Defender of the Fatherland Day; donations to help in the church’s work; the Russian National Public Organization of Veterans the local Russian Orthodox religious organization of War and the Armed Forces; Parish of Kazansky Cathedral, Lebedyani, Lipetsk the Regional public organization Council of Veterans oblast, Lipetsk and Yelets Diocese of the Russian of Military Intelligence; Orthodox Church (Moscow Patriarchy) – donations the Regional public charity support fund for graduates on the restoration of the roof of the church of the of Suvorov academies and cadet corps of the Suvorov Prophet Elijah of the Trinity Cathedral. Brotherhood; 7. Sustainable development
85 7.2. Human resources policy Personnel breakdown of VTB Group by region, people The efforts of the VTB Group are focused on using emerging opportunities to ensure long-term growth, 20,709 2005 to turn Russia into one of the most economically and 1,846 industrially advanced powers. This strategic goal can 590 only be achieved by a highly efficient and progressive team. 24,163 2006 3,673
Today the VTB Group team is made up of successful 630 managers who take a strategic approach to their 29 976 2007 work, have a broad outlook and have shown an availability to be stretched and challenged. It is 5,277 this team of professional managers that made the 692 consistent advancement of VTB Bank’s business in all market sectors possible in 2007. Human resources Russia management and development is one of the highest CIS priority, critical and strategically important areas for Other region such a young, widespread and rapidly developing banking group as VTB Group.
The recent planned increase in the number of staff Three programs are in place within the framework of of the VTB Group was mainly caused by the increase the VTB Corporate University: “Energy of Leadership” in the branch network and business expansion. Over (a competition for the VTB management reserve), the past year the number of staff of the VTB Group “Effective Management” (an open program for the has increased by 7,479 people. directors of the structural divisions of VTB) and “Strategy of Success” (a bonus program for the top The highest staff growth rates in 2007 were seen in graduates of the Corporate University). VTB24, VTB Bank (Ukraine), and VTB Leasing. The faculty of the VTB Corporate University includes Of course, not only the increase in staff, but also an representatives of the management of VTB Group, increase in their efficiency is an important element in leading economists, professors and teachers of VTB Group’s competitive advantages. The main areas Moscow universities, consultants and practitioners of the Bank’s staff training are aimed at developing (representatives of big business). The rector of the managerial skills, business efficiency and operational Corporate University is Chairman and CEO of VTB training. Bank Andrey Kostin.
VTB Bank currently has several corporate training The third enrollment of students to the VTB Corporate programs in place: the Corporate University – a set University program “Energy of Leadership 2007- of programs for the management reserve and the 2008” took place last year. The training program directors of the structural divisions of the Bank and covers: teambuilding, management, finance and the VTB Group; orientation for new employees; and budgeting, marketing, customer relations, project “Effective sales” training for client managers. management and human resources management. 2007 VTB Annual Report
86 Diversification of staff training at VTB Bank Corporate staff training at VTB Bank
4% Orientation program 240
5% 185
2,990 25% Business efficiency
17% 1,832 25% Managerial skills
7%
46% Operational training
71% 2006 2007
2006 Number of participans 2007 Number of events
Classes at the University are held through webinars In this regard, most of the employees who, received and training sessions with top managers of VTB and training in 2007, took part in internal seminars and invited participants. training sessions and took advantage of various types of distance learning – electronic courses and video Most VTB employees, who have already completed seminars. training at the Corporate University, have taken up management positions at the Bank or in the Group. VTB managed to lower the cost of the training in 2007 despite the increase in prices for educational services The international program of the VTB Corporate (training costs per employee and the cost of one day University, which is offered in conjunction with the of training were reduced). Finance Academy under the Government of the Russian Federation, was launched in October 2007 The staff assessment system used to form the and included students from Angola, Namibia, Vietnam, human resources reserve of the VTB Group, select India and China. The next step was the creation of students for the Corporate University and in other nine regional training centers on the basis of the key large-scale projects was improved in 2007. The branches of VTB Bank in the following cities: Belgorod, methodological framework of the assessment Vladimir, Ekaterinburg, Krasnodar, Krasnoyarsk, system includes all assessment techniques on the Nizhny Novgorod, Samara, St. Petersburg and market (assessment center, “360 degree” reviews, Khabarovsk. In 2007, 84% of all regional employees competence interviews, professional testing). who participated in the program received training in The choice of assessment method is determined these centers. In 2006 this figure was 49%. by business need. A standard assessment system is to be introduced at the VTB Group in 2008. The number of corporate training events increased VTB Bank will not incur direct costs, since HR in 2007, which made it possible to increase the specialists certified to international standards qualifications of a larger number of VTB Bank will perform the work without hiring outside employees. providers. 7. Sustainable development
87 Number of events held by area of corporate staff Staff training costs at VTB Bank, training at VTB Bank in 2007 RUB million
8.9 11.9
28.1 24
2006 2007
Training costs in the Corporate University External training, seminars (88) Other training programs costs Internal training, seminars (150) Certification programs (2)
To improve and support the system of staff incentives Number of VTB Bank employees that received training and to optimize and improve its effectiveness, the in 2007 (by area of corporate training) System of Incentives and Wage Payments (SIWP) designed with the assistance of McKinsey&Co and introduced in 2005 and further improved in 2007. The wage structure of employees and the criteria for quarterly performance-related bonuses are on the SIWP.
New targeted bonus programs, aimed at the achievement of specific goals and objectives and improving business efficiency, were developed and introduced. One of the key development objectives in 2008 will be upgrading the Bank’s system of incentives and wage payments and setting up uniform principles for the compensation system in
External training, seminars (2,783) the VTB Group. Internal training, seminars (204) Certification programs (3) The development of the SIWP and formation of a competitive compensation package and social policy at VTB Bank are designed to reduce the dependence of staff turnover on outside factors caused by competition on the job market. The turnover of rank-and-file staff at VTB Bank did not exceed 17% in 2007, in line with current trends in the financial sector. 2007 VTB Annual Report
88 The compensation package of VTB Bank includes: Salaries and social benefits of VTB Bank employees, RAS, RUB million monetary remuneration (salary, supplements and additional payments, premiums and bonuses); fringe Benefits and incentives (benefits, flexible social 10.3 benefit package, moral incentives). 10.0 9.1 The basic social benefit programs in the VTB Group fall into three categories:
standard social benefits available to all employees, regardless of length of service, status, salary or work performance; variable social benefits according to seniority and 7,251.6 performance of the individual employee, his division 6,735.4 and the Bank; 5,674.1 material and non-material incentives for high performing employees.
1,288.7 1,012.7 941.0 The standard package includes: 2005 2006 2007 additional paid vacation;
financial assistance to employees’ families (e.g. birth Salaries of a child, wedding); Social benefits financial assistance in case of an accident; Number of employees ('000 people) jubilee and retirement benefits; additional payments for special working conditions. Development of one of the key programs of VTB Occupational health and safety measures are also (the flexible targeted social benefit package “VTB included in the standard package. All employees of Bank employee social card”) continued in 2007. VTB Bank receive discretionary medical insurance, and This program will allow an employee to receive a high-risk employees are also given accident insurance. tailor-made set of insurance, healthcare and tourism services, and is a unique social benefit package Occupational health and safety costs accounted for offered by no other employer in Russia. The ability more than 30% of the Bank’s average monthly wage for any Group company to adapt the program to bill. comply with regional specifics makes it possible to begin project implementation throughout the Group. VTB Bank undertook a number of measures to improve occupational health and safety in 2007: An important element of the staff motivation system regular medical checkups of employees aimed at is the incentive program. The Bank has series of reducing the frequency of illness; inspections of the awards. The highest award for an employee’s work working conditions at work stations; group training and professional achievement is the “VTB Achiever” and testing of directors knowledge of occupational lapel badge. These are given to highly qualified health and safety rules; occupational health and employees for their significant contribution to the safety training in Bank branches. VTB Bank pays for Bank’s development on the completion of several the prenatal care of its female employees. years of successful work. 7. Sustainable development
89 Informational meetings are held between employees Moreover, VTB pensioners are provided with medical and Bank management in order to improve intergroup insurance under special programs, giving them relations and communications and increase emplo- the same right to material assistance as any other yees’ awareness of changes taking place at the Bank. employee, and regular excursions, holiday and jubilee celebrations are held for them. The bank undertakes regular surveys of employee opinion on issues such as current management VTB Bank has an active trade union. Trade unions are initiatives. This feedback is taken very seriously by also in place of number of foreign banks included in senior management. It enables the Bank to react the VTB Group. quickly to shift in employee opinion and maintain good staff relations. As part of the implementation of a single system of human resources management and coordination, the VTB Bank pays special attention to the promotion Group has a Human Resources Commission under the of amateur sports among its employees: volleyball, Group Management Committee, which is responsible basketball, hockey, paintball, tennis, skiing. for drafting decisions on key human resources management issues at the Group. The holding of the 5th Corporate Summer Olympics 2007, arts festivals and New Year’s parties with the The following key development goals were set for the participation of VTB Group employees from various human resources policy of VTB Bank and the Group regions of Russia, the CIS and Europe foster a single in 2008: corporate culture and the cohesion of the corporate team spirit. to make the VTB Group the employer of choice in the countries where it has a presence; VTB believes in taking care of its employees to form a common human resources recruitment even after their retirement. program; to develop and approve the Human Resources There are currently two corporate systems Management Policy of the VTB Group; of non-state pension coverage in place at VTB Bank: to introduce uniform principles of planning and control over staff costs; defined benefit scheme. to create a common information space for recruitment of personnel; As of 1 January 2008 nearly 400 pensioners to develop and adopt Regulations for corporate staff of VTB Bank were covered by this program: training; to develop and adopt Regulations for incentives for a cumulative scheme using personal pension accounts the Bank employees; (funds are accumulated through equity participation to promote VTB as an employer of choice by of VTB Bank and the employee). This system was developing relationship with universities and offering launched in December 2007, and is the most efficient internships. type of pension program, giving employees incentive to take care of their own pension provision. The Bank’s experience in all areas of human resources management policy began to be extended Forty-four employees of VTB Bank joined this program to the entire VTB Group in 2007. in 2007.
VTB Bank also has a special program for employees nearing retirement age. 2007 VTB Annual Report
90 8. Summarized Consolidated Financial Statements Derived from the Audited Consolidated Financial Statements and Auditors' Report Independent auditors’ report 91
To the Board of Directors and Shareholders of the VTB Bank:
We have audited the consolidated financial statements of VTB Bank (“the Bank”) and its subsidiaries (together “the Group”) as of and for the years ended December 31, 2007 and 2006, from which the accompanying summarized consolidated financial statements (which comprise the summarized consolidated balance sheets as at 31 December 2007 and 2006, the summarized consolidated statements of income, summarized consolidated statements of changes in shareholders’ equity and summarized consolidated statements of cash flows for the years then ended) were derived, in accordance with International Standards on Auditing. In our report dated 21 April 2008 we expressed an unqualified opinion on the consolidated financial statements from which the summarized consolidated financial statements were derived.
In our opinion, the accompanying summarized consolidated financial statements are consistent, in all material respects, with the consolidated financial statements from which they were derived.
For a better understanding of the Group's financial position as at 31 December 2007 and 2006 and the results of its financial performance and cash flows for the years then ended and of the scope of our audit, the summarized consolidated financial statements should be read in conjunction with the consolidated financial statements from which the summarized consolidated financial statements were derived and our audit report thereon.
21 April 2008 2007 VTB Annual Report Summarized Consolidated Balance Sheets as of 31 December (expressed in millions of US dollars)
92 2007 2006 Assets Cash and short-term funds 5,160 3,581 Mandatory cash balances with central banks 825 648 Financial assets at fair value through profit or loss 10,436 5,120
Financial assets pledged under repurchase agreements and loaned financial assets 2,212 2,938 Due from other banks 9,733 6,813 Loans and advances to customers 58,549 29,262 Financial assets available-for-sale 858 888 Investments in associates 167 200 Investment securities held-to-maturity 5 11 Premises and equipment 1,997 1,422 Investment property 168 178 Intangible assets 480 455 Deferred tax asset 215 93
Other assets 1,804 794 Total assets 92,609 52,403
Liabilities Due to other banks 14,794 7,587 Customer deposits 37,098 19,988 Other borrowed funds 5,176 4,468 Debt securities issued 16,489 11,565 Deferred tax liability 149 125 Other liabilities 1,231 509 Total liabilities before subordinated debt 74,937 44,242 Subordinated debt 1,171 1,169 Total liabilities 76,108 45,411 8. Summarized Consolidated Financial Statements Derived from the Audited Consolidated Financial Statements and Auditors’ Report
Summarized Consolidated Balance Sheets as of 31 December (continued) (expressed in millions of US dollars)
2007 2006 93 Equity Share capital 3,084 2,500 Share premium 8,792 1,513 Treasury shares (21) — Unrealized gain on financial assets available-for-sale and cash flow hedge 109 154 Currency translation difference 663 352 Premises revaluation reserve 587 341 Retained earnings 2,993 1,744 Equity attributable to shareholders of the parent 16,207 6,604 Minority interest 294 388 Total equity 16,501 6,992
Total liabilities and equity 92,609 52,403
Approved for issue and signed on 21 April 2008.
President – Chairman of the Management Board A.L. KostinK
Chief Financial Officer – Member of the Management Board N.NN.V..V.V TTsekhomsky
For a better understanding of the Group’s financial position and the results of its operations, and of the scope of our audit, these summarized con- solidated financial statements should be read in conjunction with the consolidated financial statements, from which these summarized consolidated financial statements have been derived, and audit report thereon. Copies of audited consolidated financial statements can be obtained from VTB Bank. 2007 VTB Annual Report Summarized Consolidated Statements of Income for the Years Ended 31 December (expressed in millions of US dollars, except earnings per share data)
94 2007 2006 Interest income 5,387 3,606 Interest expense (2,831) (1,892) Net interest income 2,556 1,714 Provision charge for impairment (526) (442) Net interest income after provision for impairment 2,030 1,272 Gains less losses arising from financial instruments at fair value through profit or loss 138 218 Gains less losses from available-for-sale financial assets 116 348 Gains less losses arising from dealing in foreign currencies 547 73 Foreign exchange translation gains less losses 108 265 Fee and commission income 637 401
Fee and commission expense (80) (50) Share in income of associates 18 15
Income arising from non-banking activities 95 111
Other operating income 123 157 Net non-interest income 1,702 1,538
Operating income 3,732 2,810
Staff costs and administrative expenses (1,948) (1,370) Expenses arising from non-banking activities (63) (90) Profit from disposal of subsidiaries and associates 98 54 Profit before taxation 1,819 1,404 Income tax expense (305) (232) Profit after taxation from continuing operations 1,514 1,172 Profit from discontinued operations –7 Net profit 1,514 1,179 Net profit attributable to: Shareholders of the parent 1,480 1,137 Minority interest 34 42 Basic and diluted earnings per share (expressed in USD per share) 0.000241 0.000218 Basic and diluted earnings per share – continuing operations (expressed in USD per share) 0.000241 0.000217 Basic and diluted earnings per share – discontinued operations (expressed in USD per share) 0.000000 0.000001
For a better understanding of the Group’s financial position and the results of its operations, and of the scope of our audit, these summarized con- solidated financial statements should be read in conjunction with the consolidated financial statements, from which these summarized consolidated financial statements have been derived, and audit report thereon. Copies of audited consolidated financial statements can be obtained from VTB Bank. 8. Summarized Consolidated Financial Statements Derived from the Audited Consolidated Financial Statements and Auditors’ Report Summarized Consolidated Statements of Cash Flows for the Years Ended 31 December (expressed in millions of US dollars)
2007 2006 95 Cash flows from operating activities Interest received 5,246 3,430 Interest paid (2,622) (1,889) Income received on operations with financial instruments at fair value through profit or loss 286 131 Income received on dealing in foreign currency 474 76 Fees and commissions received 637 401 Fees and commissions paid (96) (50) Income arising from non-banking activities and other operating income received 110 166
Staff costs, administrative expenses and expenses arising from non-banking activities paid (1,790) (1,313) Income tax paid (476) (316) Cash flows from operating activities before changes in operating assets and liabilities 1,769 636
Net decrease (increase) in operating assets
Net increase in mandatory cash balances with central banks (125) (205)
Net decrease in restricted cash 38 50
Net (increase) decrease in financial assets at fair value through profit or loss (5,521) 1,084 Net increase in due from other banks (2,617) (2,556) Net increase in loans and advances to customers (28,231) (8,420) Net increase in other assets (914) (485) Net (decrease) increase in operating liabilities Net increase in due to other banks 6,805 859 Net increase in customer deposits 15,566 6,117 Net (decrease) increase in promissory notes and certificates of deposits issued 2 (203) Net increase in other liabilities 266 72 Net cash used in operating activities (12,962) (3,051)
For a better understanding of the Group’s financial position and the results of its operations, and of the scope of our audit, these summarized con- solidated financial statements should be read in conjunction with the consolidated financial statements, from which these summarized consolidated financial statements have been derived, and audit report thereon. Copies of audited consolidated financial statements can be obtained from VTB Bank. 2007 VTB Annual Report
Summarized Consolidated Statements of Cash Flows for the Years Ended 31 December (continued) (expressed in millions of US dollars)
96 2007 2006 Cash flows from (used in) investing activities Dividends received 38 44 Proceeds from sale or maturities of financial assets available-for-sale 2,409 1,136 Purchase of financial assets available-for-sale (256) (2,900) Purchase of subsidiaries, net of cash acquired (11) (15) Sale of disposal group held for sale – 122 Purchase of minority interest in subsidiaries (309) – Purchase of associates (10) (5) Disposal of associates 45 – Disposal of subsidiaries, net of cash disposed 109 (9) Proceeds from maturities of investment securities held-to-maturity 82 Purchase of investment securities held-to-maturity (2) (6) Purchase of premises and equipment (343) (282) Proceeds from sale of premises and equipment 73 46 Purchase of intangible assets (15) (8) Purchase of investment property (19) – Proceeds from disposal of investment property 61 92 Net cash from (used in) investing activities 1,778 (1,783)
Cash flows from financing activities Dividends paid (135) (63) Proceeds from other borrowings 1,547 681 Repayment of other borrowings (660) (595) Proceeds from syndicated loans 453 2,698 Repayment of syndicated loans (831) (1,259) Proceeds from issuance of RUR-denominated bonds 501 953 Repayment of RUR-denominated bonds – (72) Proceeds from issuance of eurobonds 5,628 3,541 Repayment of eurobonds (1,495) (370) Proceeds from issuance of SSD debentures (Shuldscheindarlehen) – 241 Repayment of SSD debentures (Shuldscheindarlehen) (227) (157) Proceeds from share issue, less transaction costs 7,842 – Treasury shares purchase (21) – Net cash provided by financing activities 12,602 5,598 Effect of exchange rate changes on cash and cash equivalents 199 174 Net increase in cash and cash equivalents 1,617 938 Cash and cash equivalents at beginning of the year 3,479 2,541 Cash and cash equivalents at the end of the year 5,096 3,479
For a better understanding of the Group’s financial position and the results of its operations, and of the scope of our audit, these summarized con- solidated financial statements should be read in conjunction with the consolidated financial statements, from which these summarized consolidated financial statements have been derived, and audit report thereon. Copies of audited consolidated financial statements can be obtained from VTB Bank. 8. Summarized Consolidated Financial Statements Derived from the Audited Consolidated Financial Statements and Auditors’ Report Summarized Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended 31 December (expressed in millions of US dollars)
Attributable to shareholders of the parent 97 Unrealized gain on financial Share Share Treasury assets Premises Currency Retained Minority Total capital premium shares available revaluation translation earnings Total interest equity for-sale reserve difference and cash flow hedge Balance at 31 December 2005 2,500 1,513 – 89 72 86 660 4,920 349 5, 269 Unrealized gain on financial assets available- for-sale, net of tax –––403–––403 2 405 Transferred to profit or loss on sale, net of tax – – – (338)–––(338) – (338) Premises revaluation, net of tax ––––271––271 11 282 Transfer of premises revaluation reserve upon disposal or depreciation ––––(2)–2– – – Effect of translation –––––266–266 33 299 Total income recognized directly in equity –––65 269 266 2 602 46 648 Net profit ––––––1,137 1,137 42 1,179 Total income and expense for the period – – – 65 269 266 1,139 1,739 88 1,827 Dividends declared ––––––(63) (63) (1) (64)
Acquisition of subsidiaries –––––––– 1 1 Increase in share capital of subsidiaries ––––––(4)(4) 9 5 Acquisition of minority interests ––––––33 (7) (4) Changes in minority interests ––––––99 (9) –
Disposal of subsidiaries –––––––– (42) (42)
Balance at 31 December 2006 2,500 1,513 – 154 341 352 1,744 6,604 388 6,992
For a better understanding of the Group’s financial position and the results of its operations, and of the scope of our audit, these summarized con- solidated financial statements should be read in conjunction with the consolidated financial statements, from which these summarized consolidated financial statements have been derived, and audit report thereon. Copies of audited consolidated financial statements can be obtained from VTB Bank. 2007 VTB Annual Report
Summarized Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended 31 December (continued) (expressed in millions of US dollars)
98 Attributable to shareholders of the parent Unrealized gain on financial Share Share Treasury assets Premises Currency Retained Minority Total capital premium shares available revaluation translation earnings Total interest equity for-sale reserve difference and cash flow hedge Balance at 31 December 2006 2,500 1,513 – 154 341 352 1,744 6,604 388 6,992 Unrealized gain on financial assets available- for-sale, net of tax –––16–––16 (1) 15 Transferred to profit or loss on sale or impairment, net of tax – – – (112) – – – (112) – (112) Unrealized gains less losses on cash flow hedge, net of tax –––51–––51 – 51 Premises revaluation, net of tax ––––264––264 9 273 Transfer of premises revaluation reserve upon disposal or depreciation – – – – (15) – 15 – – – Effect of translation – – – – – 324 – 324 28 352 Total income recognized directly in equity – – – (45) 249 324 15 543 36 579 Net profit ––––––1,480 1,480 34 1,514 Total income and expense for the period – – – (45) 249 324 1,495 2,023 70 2,093 Dividends declared – – – – – – (133) (133) (2) (135) Share issue 584 7,279 – ––––7,863 – 7,863 Treasury shares – – (21) ––––(21) (21) Acquisition of subsidiaries –––––––– 25 25 Increase in share capital of subsidiaries ––––––2626 (26) – Acquisition of minority interests – – – – – – (146) (146) (165) (311) Changes in associates’ equity (not recognized in profit or loss) ––––––44 – 4 Establishment of subsidiaries –––––––– 6 6
Disposal of subsidiaries – – – – (3) (13) 3 (13) (2) (15) Balance at 31 December 2007 3,084 8,792 (21) 109 587 663 2,993 16,207 294 16,501
For a better understanding of the Group’s financial position and the results of its operations, and of the scope of our audit, these summarized con- solidated financial statements should be read in conjunction with the consolidated financial statements, from which these summarized consolidated financial statements have been derived, and audit report thereon. Copies of audited consolidated financial statements can be obtained from VTB Bank. 9. Summarized Financial Statements in accordance with RAS 2007 VTB Annual Report Balance sheet (published form) as at 1 January 2008
100 Credit institution VTB Bank (open joint-stock company) Postal address ulitsa Plyushchikha 37, Moscow 119121 Code of form 0409806 Annual thousand RUB
No. Line item Data as at the Data as at reporting date the reporting date of the previous year I Assets 1Cash 7 920 359 10 403 279 2 Funds of credit institutions in the Central Bank of the Russian Federation 54 828 115 35 904 485 2.1 Mandatory reserves 12 347 946 10 214 305 3 Amounts due from credit institutions 56 172 802 53 638 908 4 Net investments in trading securities 122 055 010 75 126 760 5 Net loans and advances to customers 1 026 364 733 478 672 466 6 Net investments in securities held to maturity 8 356 476 4 567 489 7 Net investments in securities available for sale 178 096 632 88 584 871 8 Fixed assets, intangible assets, and inventory 21 176 899 16 267 294 9 Claims on receipt of interest 7 092 563 2 591 966 10 Other assets 25 308 166 15 462 209 11 Total assets 1 507 371 755 781 219 727
II Liabilities 12 Loans of the Central Bank of the Russian Federation 15 420 000 13 165 550 13 Amounts due to credit institutions 430 947 307 243 369 719 14 Amounts due to customers (non-credit institutions) 612 435 315 314 156 265 14.1 Individual deposits 33 743 467 51 454 679 15 Debt obligations issued 76 650 985 64 194 536 16 Interest liabilities 8 323 899 5 855 692 17 Other liabilities 4 495 170 5 998 523 18 Provisions for credit-related contingent obligations, other possible losses and operations with residents of offshore zones 412 286 162 316 19 Total liabilities 1 148 684 967 646 902 601 9. Summarized Financial Statements 8.in accordanceFinancial statements with RAS
Balance sheet 101 (published form) as at 1 January 2008
No. Line item Data as at the Data as at reporting date the reporting date of the previous year III Sources of equity 20 Share capital 67 241 385 52 111 124 20.1 Registered ordinary shares and interests 67 241 385 52 111 124 20.2 Registered preferred shares 00 20.3 Unregistered charter capital of non-stock credit institutions 0 0 21 Treasury stock 00 22 Share premium 219 170 513 27 731 088 23 Revaluation of fixed assets 11 133 115 7 480 834 24 Expenses of future periods and forthcoming payments affecting equity (capital) 5 392 967 6 043 987 25 Funds and retained earnings of previous years (outstanding losses of previous years) 48 556 750 35 862 343 26 Profit (loss) for the reporting period 17 977 992 17 175 724 27 Total sources of equity 358 686 788 134 317 126 28 Total liabilities 1 507 371 755 781 219 727
IV Off-balance sheet liabilities 29 Irrevocable obligations of the credit institution 1 062 413 285 348 192 611 30 Guarantees issued by the credit institution 80 101 544 63 534 852
No operations were performed that were subject to disclosure in section V “Trust management accounts”.
President and Chairman of Management Board A. L. Kostin [[stamp]sttamamp]p]
Chief Accountant O. A. Avdeeva 2007 VTB Annual Report Income statement (published form) for 2007
102 Name of the credit institution: VTB Bank (open joint-stock company) Postal address ulitsa Plyushchikha 37, Moscow 119121 Code of form 0409807 Annual thousand RUB
No. Line item Data for the Data for the reporting period same period of the previous year Interest received and similar income from: 1 Amounts due from credit institutions 11 384 603 5 846 704 2 Loans provided to clients (non-credit institutions) 51 982 434 34 492 991 3 Provision of financial leasing services 0 0 4 Fixed-income securities 9 237 692 6 464 866 5 Other sources 251 342 141 331 6 Total interest received and similar income 72 856 071 46 945 892
Interest paid and similar expenses on: 7 Amounts due to credit institutions 18 695 117 10 704 977 8 Amounts due to customers (non-credit institutions) 21 727 118 13 003 336 9 Debt obligations issued 4 760 575 4 593 349 10 Total interest paid and similar expenses 45 182 810 28 301 662 11 Net interest and similar income 27 673 261 18 644 230 12 Gains less losses arising from dealing in securities 8 590 794 12 728 769 13 Gains less losses arising from dealing in foreign currencies 11 096 063 1 356 513 14 Gains less losses arising from dealing in precious metals and other financial instruments (1 012 948) 189 394 15 Gains less losses from foreign exchange translation (10 052 139) 110 957 16 Commission income 10 407 628 5 796 056 17 Commission expenses 622 754 429 456 18 Other income from one-off operations 485 169 29 537 19 Other net operating income (1 132 438) (2 212 202) 20 Administrative expenses 14 837 054 12 181 672 21 Other provisions (2 185 039) 2 221 550 22 Profits before tax 28 410 543 26 253 676 23 Taxes accrued (including profits tax) 10 432 551 9 077 952 24 Profit (loss) for the reporting period 17 977 992 17 175 724
President and Chairman of Management Board A. L. Kostin [[stamp]ststamp]
Chief Accountant O. A. Avdeeva 9. Summarized Financial Statements in accordance with RAS Statement of capital adequacy, size of loan-loss provisions, and other assets as at 1 January 2008
103 Name of the credit institution: VTB Bank (open joint-stock company) Postal address ulitsa Plyushchikha 37, Moscow 119121
Code of form 0409807 Annual
No. Indicator Data as at the Data as at reporting date the reporting date of the previous year 1 Equity (capital), thousand RUB 278 296 267 97 342 258 2 Actual equity (capital) adequacy ratio, percent 19.0 14.5 3 Statutory equity (capital) adequacy ratio, percent 10.0 10.0 4 Estimated provisions for potential losses on loans, loan debt and equivalent debt, thousand RUB 11 650 556 11 736 926 5 Actual provisions for potential losses on loans, loan debt and equivalent debt, thousand RUB 11 650 556 11 736 926 6 Estimated provisions for potential losses, thousand RUB 1 290 879 453 909 7 Actual provisions for potential losses, thousand RUB 1 290 879 453 909
President and Chairman of Management Board A. L. Kostin [[stamp]sttama p]p
Chief Accountant O. A. Avdeeva 2007 VTB Annual Report 10. Transactions of JSC Bank VTB
104 10.1. Major transactions of JSC VTB Bank
In 2007 VTB did not perform any transactions that were major transactions as defined in accordance with article 79 of the Federal Law No. 208-FZ of 26 December 1995 On Joint-Stock Companies.
10.2. Interested-party transactions of JSC VTB Bank
Information on the interested-party transactions of VTB in 2004–2007, approved by the Supervisory Council or the general meeting of shareholders:
Year Total number of transactions Total amount of transactions performed in monetary terms (thousand RUB) 2004 208 406,774,471 2005 1,376 563,968,082 2006 4,756 1,437,468,855 2007 5,309 4,071,978,368 11. Glossary 105
IPO Initial public offering GDR Global depositary receipts SPO Secondary public offering Share An issuable security conferring on its owner (the shareholder) the right to receive a portion of the profits of a joint- stock company in the form of dividends, to participate in the management of the company and to a portion of the assets remaining after its liquidation. The share is a registered security Bank VTB North-West JSC Bank VTB North-West VTB Bank, the Bank JSC VTB Bank (the former JSC Vneshtorgbank), the foundation of the VTB Group Brokerage activity Activity to perform civil-law transactions with securities on behalf and at the expense of a client (including the issuer of issuable securities on their placement) or on its own behalf and at the expense of the client on the basis of contracts with the client for a consideration VTB24 Bank VTB24 (closed joint-stock company) VTB Group, the Group, VTB A universal Russian banking group, including financial institutions in Russia, the CIS, Europe, Asia and Africa Custodial services Provision of services on the storage of securities certificates and/or the registration and transfer of rights to securities Securities management Trust management by a legal entity on its own behalf for a fee over a specific period of the following items transferred services to it but belonging to another party, in the interest of this party or third parties indicated thereby: • securities; • funds designated for investment in securities; • funds and securities obtained in the process of managing securities Dealer activity Activity on performing transactions in the sale and purchase of securities in its own name and at its own expense by public announcement of the price of sale and/or purchase of specific securities, with mandatory purchase and/or sale of these securities at the prices announced by the entity engaged in such activity EBRD European Bank of Reconstruction and Development Securities listing Inclusion of securities on a quotation list by an exchange Novosibirskvneshtorgbank Novosibirsk commercial regional joint-stock bank Vneshtorgbank (closed joint-stock company) IFRS International Financial Reporting Standards PSB JSC Promyshlenno-stroitelny bank (now Bank VTB North-West) Public securities offering Placement of securities by public offering, including placement of securities in trading on exchanges and/or other organizers of trading on the securities market RAS Russian Accounting Standards CIS The Commonwealth of Independent States and the countries. It comprises (not including Russia) as at the date of preparation of this report: Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan Stock exchange An organizer of trading on the securities market that meets the requirements of Russian law 2007 VTB Annual Report
106 12. Organizational information
12.1. Main correspondent accounts
Currency Bank Acct. No. AUD Westpac Banking Corporation, Sydney (WPAC AU 2S) RAR0001975 CAD Royal Bank of Canada, Toronto (ROYC CA T2) 095912098408 CHF Russian Commercial Bank Ltd., Zurich (RKBZ CH ZZ) 666000.0048 UBS AG, Zurich (UBSW CH ZH) 0230-69082.05T DKK Danske Bank, Copenhagen (DABA DK KK) 3996019136 EUR Deutsche Bank AG, Frankfurt/Main (DEUT DE FF) 10094980801000 VTB Bank (Austria) AG, Vienna (DOBA AT WW) 08.00.0617203-023 GBP HSBC Bank Plc, London (MIDL GB 22) 36505983 JPY Bank of Tokyo-Mitsubishi UFJ Ltd, Tokyo (BOTK JP JT) 653-0408522 NOK DNB NOR Bank ASA, Oslo (DNBA NO KK) 7002.02.05170 NZD ASB Bank Ltd, Auckland (ASBB NZ 2A) 12-3121-0060126-00 SEK Nordea Bank Sweden AB, Stockholm (NDEA SE SS) 39527908930 SEK SGD VTB Bank (Europe) Plc, Singapore (MNBL SG SG) 315150-7321 USD Bank of New York, New York (IRVT US 3N) 890-0055-006 JPMorgan Chase Bank, New York (CHAS US 33) 001-1-907557 12. Organizational information
107 12.2. Licenses General license to export unprocessed gold in forms that cannot be used to mint coins (fine gold in standard or measuring ingots) No. General license to perform banking operations No. LG4270705505455, received 22 May 2007. 1000, received 9 March 2007. General license to export unprocessed silver with License to place in deposits and dispose of precious a purity of at least 999 parts silver to 1,000 parts metals and to perform other operations with precious alloy (fine silver in standard or measuring ingots) metals No. 1000, received 9 March 2007. No. LG4270705505456, received 22 May 2007.
License of a professional participant on the securities License to work with information constituting a market to perform depository activity No. 178-06497- state secret No. 2242, received 17 November 000100, received 25 March 2003. 2005.
License of a professional participant on the securities License to take measures and/or provide services market to perform brokerage activity No. 177-06492- to protect a state secret No. 2243, received 17 000100, received 25 March 2003. November 2005.
License of a professional participant on the securities License to perform technical maintenance of market to perform dealer activity No. 177-06493- cryptographic equipment No. 19 X, received 29 000100, received 25 March 2003. March 2006.
License of a professional participant on the securities License to distribute cryptographic equipment No. market to manage securities No. 177-06499-000100, 20 R, received 29 March 2006. received 25 March 2003. License to provide information encryption License to perform activity as a specialized services No. 21 U, received 29 March 2006. depository of investment funds, unit trust investment funds and non-state pension funds No. 22-000-0- 00011, received 4 October 2000. 2007 VTB Annual Report
108 12.3. Membership Non-Profit Organization Association of Regional of non-profit organizations Banks of Russia. Date of joining – 22 October 2004. IFA International Forfaiting Association. Date of Association of Russian Banks. Date of joining – joining – 8 March 2005. 13 February 1996. Council for Security Cooperation in the Asia Pacific. Non-Profit Organization Association of Bill Market Date of joining – 3 November 2003. Participants. Date of joining – 15 October 1996. U.S.-Russia Business Council. Date of joining – 29 International Capital Market Association. Date of December 2005. joining – 16 March 1995. International Accounting Standards Committee Russian National SWIFT Association. Date of joining – Foundation. Date of joining – 4 August 2005. 26 July 1995. Professional Association of Registrars, Transfer Russian Union of Industrialists and Entrepreneurs Agents and Depositaries (PARTAD). Date of joining – (Employers). Date of joining – 9 October 2002. 26 September 2007.
World Economic Forum. Date of joining – 10 August Non-Profit Association of Legal Entities Russian- 2001. American Business Council. Date of joining – 20 December 2006. Association of Russian Banks – VISA members. Date of joining – 9 April 1997. Diamond Chamber of Russia. Date of joining – 6 April 2000. Association of Russian Banks – Europay International members. Date of joining – 1 March 1999. Russo-British Chamber of Commerce. Date of joining – 16 January 2004. National Foreign Exchange Association. Date of joining – the Bank does not have this information. American Chamber of Commerce (American Chamber of Commerce in Moscow, Russia Inc.). Date of Non-Profit Organization Russian Chemists Union. joining – 12 November 2003. Date of joining – 10 December 2003. Autonomous Independent Organization Russian-Arab Moscow Chamber of Commerce and Industry. Date of Business Council. Date of joining – 17 December joining – 27 April 2004. 2003.
APEC Business Advisory Council. Date of joining – Non-Profit Partnership Russian-Chinese Business 29 March 2004. Council. Date of joining – 22 March 2005. 12. Organizational information
109 Non-Profit Partnership Business Center for Economic Non-Profit Partnership Club of Directors of Banking Development of the CIS. Date of joining – 10 August Public Relations and Advertising Services. Date of 2006. joining – 2003.
Non-Profit Partnership Russian National Committee Non-Profit Partnership Corporate Media Assistance. of the International Chamber of Commerce – World Date of joining – 25 December 2006. Business Organization. Date of joining – 6 May 2000. Non-Profit Partnership to Promote Cooperation Non-Profit Partnership National Securities Market Between the CIS Member States CIS Financial and Association. Date of joining – 16 January 1996. Banking Council. Date of joining – 1 December 2006.
Non-Profit Partnership St. Petersburg Stock Exchange. Society for Worldwide Interbank Financial Date of joining – 15 August 2005. Telecommunication SCRL. Date of joining – 20 November 1991. Non-Profit Partnership RTS Stock Exchange. Date of joining – 19 December 1997. Association of Russian Banks – MasterCard International members. Date of joining – 1 March Non-Profit Partnership National Council on Corporate 1999. Governance. Date of joining – 24 May 2006. 2007 VTB Annual Report
110 13. Contact information
VTB Group Regional Branch of JSC VTB Bank in Lipetsk: Location: ul. Pervomaiskaya 1, Lipetsk branch network of VTB Bank Lipetsk oblast 398001 Telephone: (474-2) 22-70-07 Central Federal District Branch of JSC VTB Bank in Oryol Branch of JSC VTB Bank in Belgorod Location: ul. Maksima Gorkogo 47, Oryol Location: Pr. Slavy 35A Oryol oblast 302040 Belgorod 308600 Telephone: (486-2) 43-72-73 Telephone: (472-2) 58-02-00 Branch of JSC VTB Bank in Ryazan Branch of JSC VTB Bank in Bryansk Location: sh. Moskovskoe 39, bldg. 5, Ryazan Location: ul. Arsenalskaya 16 Ryazan oblast 390044 Bryansk 241000 Telephone: (491-2) 34-70-80 Telephone: (483-2) 66-06-95 Branch of JSC VTB Bank in Smolensk Branch of JSC VTB Bank in Vladimir Location: prosp. Gagarina 5a, Smolensk Location: ul. Razina 21 Smolensk oblast 214000 Vladimir 600001 Telephone: (481-2) 49-96-04 Telephone: (492-2) 32-09-70 Branch of JSC VTB Bank in Tambov Branch of JSC VTB Bank in Voronezh Location: ul. Internatsionalnaya 16a, Tambov Location: Prosp. Revolyutsii 58 Tambov oblast 392000 Voronezh 394000 Telephone: (475-2) 63-20-35 Telephone: (473-2) 53-19-26 Branch of JSC VTB Bank in Tver Branch of JSC VTB Bank in Kaluga Location: per. Svobodny 9, Tver Location: ul. Dostoevskogo 20, Kaluga Tver oblast 170100 Kaluga oblast 248653 Telephone: (482-2) 248-18-09 Telephone: (484-2) 56-50-85 Branch of JSC VTB Bank in Tula Branch of JSC VTB Bank in Kostroma Location: ul. L. Tolstogo 134, Tula Location: ul. Sovetskaya 49, Kostroma Tula oblast 300034 Kostroma oblast 156000 Telephone: (487-2) 36-00-25 Telephone: (494-2) 31-76-46 Branch of JSC VTB Bank in Yaroslavl Branch of JSC VTB Bank in Kursk Location: ul. Rybinskaya 44a, Yaroslavl Location: ul. Radishcheva 24, Kursk Yaroslavl oblast 150014 Kursk oblast 305000 Telephone: (485-2) 72-56-24 Telephone: (471-2) 36-05-01 13. Contact information
Northwest Federal District Branch of JSC VTB Bank in Nalchik 111 Location: prosp. Lenina 17, block 3, Nalchik Branch of JSC VTB Bank in Vologda Republic of Kabardino-Balkaria 360000 Location: ul. Chelyuskintsev 9 Telephone: (866-2) 40-02-11 Vologda 160001 Branch of JSC VTB Bank in Rostov-na-Donu Telephone: (817-2) 57-16-01 Location: prosp. Voroshilovsky 62, bldg. 284, Rostov-na-Donu Branch of JSC VTB Bank in Vyborg Rostov oblast 344010 Location: ul. Krepostnaya 16, Vyborg Telephone: (863-2) 97-27-28 Leningrad oblast 188800 Telephone: (813-78) 2-53-02 Branch of JSC VTB Bank in Stavropol Location: ul. Marshala Zhukova 7, Stavropol Branch of JSC VTB Bank in Kaliningrad Stavropol krai 350000 Location: ul. Bolnichnaya 5, Kaliningrad Telephone: (865) 226-09-95 Kaliningrad oblast 236040 Telephone: (401) 235-01-11 Volga Federal District
Branch of JSC VTB Bank in St. Petersburg Branch of JSC VTB Bank in Izhevsk Location: ul. B. Morskaya 30, lit. A Location: ul. Pushkinskaya 367, Izhevsk St. Petersburg, 190000 Udmurt Republic 426011 Telephone: (812) 494-94-54 Telephone: (341-2) 275-73-19
Branch of JSC VTB Bank in Syktyvkar Branch of JSC VTB Bank in Ioshkar-Ola Location: ul. Pervomaiskaya 78, bldg. 1, Location: ul. Palantaya 112B, Ioshkar-Ola Syktyvkar Republic of Mari El 424000 Komi Republic 167610 Telephone: (836-2) 45-04-03 Telephone: (821-2) 21-51-80 Tatar Branch of JSC VTB Bank in Kazan Southern Federal District Location: ul. Ostrovskogo 84, Kazan Republic of Tatarstan 420107 Branch of JSC VTB Bank in Astrakhan Telephone: (843) 570-67-01 Location: ul. Kuibysheva 67 Astrakhan 414056 Branch of JSC VTB Bank in Nizhny Novgorod Telephone: (851-2) 54-24-24 Location: ul. Reshetnikovskaya 4 Nizhny Novgorod 603950 Branch of JSC VTB Bank in Volgograd Telephone: (831-2) 18-04-34 Location: ul. Raboche-Krestyanskaya 30a Volgograd 400074 Branch of JSC VTB Bank in Orenburg Telephone: (844-2) 93-09-69 Location: ul. Chkalova 15/1, Orenburg Orenburg oblast 460058 Branch of JSC VTB Bank in Krasnodar Telephone: (353-2) 99-49-92 Location: ul. Krasnoarmeiskaya 116, bldg. 2, Krasnodar Branch of JSC VTB Bank in Penza Krasnodar krai 350000 Location: ul. Moskovskaya 9, Penza Telephone: (861-2) 79-56-65 Penza oblast 440000 Telephone: (841-2) 52-03-53 2007 VTB Annual Report
112 Branch of JSC VTB Bank in Perm Siberian Federal District Location: ul. Lunacharskogo 54, Perm Perm oblast 614000 Branch of JSC VTB Bank in Barnaul Telephone: (342) 237-77-11 Location: Krasnoarmeisky prosp. 10 Barnaul, Altai krai 656049 Branch of JSC VTB Bank in Samara Telephone: (385-2) 39-91-66 Location: ul. Mayakovskogo 14, Samara 443100 Telephone: (846-2) 37-53-33 Branch of JSC VTB Bank in Irkutsk Location: ul. Sverdlova 40 Branch of JSC VTB Bank in Saransk Irkutsk 664003 Location: ul. Bogdana Khmelnitskogo 42A, Saransk Telephone: (395-2) 24-39-40 Republic of Mordovia 430000 Telephone: (834-2) 47-35-84 Branch of JSC VTB Bank in Kemerovo Location: ul. N. Ostrovskogo 12, Kemerovo Branch of JSC VTB Bank in Saratov Kemerovo oblast 650099 Location: ul. Im. M.Yu. Lermontova 28a Telephone: (384-2) 36-77-67 Saratov 410002 Telephone: (845-2) 27-04-58 Branch of JSC VTB Bank in Krasnoyarsk Location: Krasnaya pl. 3b, Krasnoyarsk Branch of JSC VTB Bank in Ulyanovsk Krasnoyarsk krai 660021 Location: ul. Kuznetsova 5a, Ulyanovsk Telephone: (391-2) 56-08-02 Ulyanovsk oblast 432062 Telephone: (842-2) 41-62-06 Branch of JSC VTB Bank in Novosibirsk Location: ul. Kirova 44, Novosibirsk Branch of JSC VTB Bank in Ufa Novosibirsk oblast 630102 Location: ul. Shafieva 52, Ufa Telephone: (383-2) 02-10-02 Republic of Bashkortostan 450096 Telephone: (347-2) 37-60-00 Branch of JSC VTB Bank in Omsk Location: ul. Tarskaya 6, Omsk Branch of JSC VTB Bank in Cheboksary Omsk oblast 644099 Location: ul. K. Ivanova 80a, Cheboksary Telephone: (381-2)25-53-95 Chuvash Republic 428018 Telephone: (835-2) 42-04-02 Branch of JSC VTB Bank in Tomsk Location: prosp. Lenina 39, Tomsk Urals Federal District Tomsk oblast 634034 Telephone: (382-2) 56-46-03 Branch of JSC VTB Bank in Ekaterinburg Location: ul. Stepana Razina 16 Branch of JSC VTB Bank in Ulan-Ude Ekaterinburg 620142 Location: ul. Klyuchevskaya 55b, Ulan-Ude Telephone: (343-2) 217-81-00 Republic of Buryatia 670013 Telephone: (301-2) 41-54-15 Branch of JSC VTB Bank in Tyumen Location: ul. Semakova 2, bldg. 1, Tyumen Branch of JSC VTB Bank in Chita Tyumen oblast 625003 Location: ul. Amurskaya 41, Chita Telephone: (345-2) 45-11-55 Chita oblast 672010 Telephone: (302-2) 36-90-03 Branch of JSC VTB Bank in Chelyabinsk Location: ul. Karla Liebknechta 2, Chelyabinsk Chelyabinsk oblast 454092 Telephone: (351-2) 39-62-01 13. Contact information
Far Eastern Federal District Open joint-stock company 113 Bank VTB North-West Branch of JSC VTB Bank in Blagoveshchensk JSC VTB Bank North-West Location: per. Sovetsky 65/1, Blagoveshchensk Address: Nevsky prospekt 38, St. Petersburg 191011 Amur oblast 675005 Telephone: (812) 329-83-29 Telephone: (416-2) 22-31-01 Fax: (812) 310-61-73 Website: www.vtb-sz.ru Branch of JSC VTB Bank in Vladivostok E-mail: [email protected] Location: ul. Mordovtseva 8a, Vladivostok Primorsky krai 690091 Financial companies Telephone: (423-2) 30-14-55 Open Joint Stock Company VTB-Leasing Branch of JSC VTB Bank in Magadan JSC VTB-Leasing Location: prosp. Lenina 30B, Magadan Address: pr. Akademika Sakharova 10, Moscow Magadan oblast 685000 107078 Telephone: (413-2) 60-73-34 Telephone: (495) 514-16-51, 514-16-52, 514-16-53 Branch of JSC VTB Bank Fax: (495) 514-16-50 in Petropavlovsk-Kamchatsky Website: www.vtb-leasing.com Location: ul. Lukashevskogo 11, Petropavlovsk- E-mail: [email protected] Kamchatsky, Kamchatka oblast 683031 Telephone: (415-2) 26-89-00 Closed joint-stock company VTB-Capital, CJSC VTB-Capital Branch of JSC VTB Bank in Khabarovsk Address: ulitsa Bolshaya Morskaya 29, St. Location: ul. Moskovskaya 7, Khabarovsk Petersburg, 190000 Khabarovsk krai 680000 Telephone: (812) 326-07-70, fax: (812) 326-07-97 Telephone: (421-2) 41-36-01. E-mail: [email protected]
Branch of JSC VTB Bank in Yakutsk Closed joint-stock company VTB-Invest Location: ul. Yaroslavskogo 20, Yakutsk CJSC VTB-Invest Republic of Sakha (Yakutia) 677018 Address: Capital Plaza, 7th floor, 4-i Lesnoi per. 4, Telephone: (411-2) 42-39-43 Moscow 125047 Telephone: (495) 775-54-55, 783-70-35 Fax: (495) 775-54-49 Banks and financial companies Website: vtb-invest.ru of the VTB Group in Russia E-mail: [email protected] Limited liability company VTB Strakhovanie Banks Insurance Company OJSC SK VTB Strakhovanie Bank VTB 24 (closed joint-stock company) Address: Turgenevskaya pl. 2/4, bldg. 1, Moscow VTB 24 (JSC) 101000 Address: ulitsa Myasnitskaya 35, Moscow 101000 Telephone: (495) 580-73-33, (495) 644-44-40; Telephone: (495) 777-24-24 8-800-100-44-40 (within Russia) Fax: (495) 980-46-66 Fax: (495) 589-24-08 Website: www.vtb24.ru Website: www.vtbins.ru E-mail: [email protected] E-mail: [email protected] 2007 VTB Annual Report
114 Limited liability company MultiCarta VTB Bank (Austria) AG OJSC MultiCarta Address: A-1011 Vienna, Parkring 6, Address: ulitsa Vorontsovskaya 43, bldg. 1, P.O. Box 1451, Austria Moscow 109147 Telephone: (431) 515 35 226 Telephone: (495) 784-60-55 Fax: (431) 515 35 316 Fax: (495) 785-12-24 E-mail: [email protected] Website: www.multicarta.ru E-mail: [email protected] Russian Commercial Bank (Cyprus) Ltd. Address: 2, Amathuntos street, Closed joint-stock company Obyedinyonnaya P.O. Box 56868, 3310 Limassol, Cyprus depozitarnaya kompaniya [United Depositary Telephone: (357) 25 83 73 00 Company] Fax: (357) 25 34 23 50 CJSC ODK E-mail: [email protected] Address: ulitsa Myasnitskaya 35, Moscow 101000 Telephone: (495) 956-30-70 Russische Kommerzial Bank AG Fax: (495) 956-30-70 Address: Hofackerstrasse 32, E-mail: [email protected] Postfach 1274,CH-8032 Zurich, Switzerland Website: www.odk.ru Telephone: (4144) 386 86 86 Fax: (4144) 386 86 87 Website: www.rkb.ch Banks and financial companies E-mail: [email protected] .. of the VTB Group abroad Euroleasing Gesellschaft mit beschrankter Haftung Euroleasing GmbH Banks and financial companies in Europe Address: Friedrichstrasse 95, D-10117 Berlin, Bundesrepublik Deutschland VTB Bank (Europe) Plc Telephone: (030) 20-96-20-92 London (United Kingdom) Fax: (030) 20-96-20-92 Address: 81 King William Street, E-mail: [email protected] London EC4N 7BG, United Kingdom Telephone: (4420) 7263 2066 Banks in the CIS Fax: (4420) 7283 4840 Website: www.uk.vtb.com Open Joint-Stock Company VTB Bank JSC VTB Bank VTB Bank (France) SA Address: ulitsa Gogolevskaya 22-24, Kiev, Address: 79/81, Boulevard Haussmann – 75382 01601 Ukraine Paris Cedex 08, France Telephone: (38 044) 391-54-09, 239-35-39 Telephone: (331) 4006 4321 Fax: (38 044) 391-54-09 Fax: (331) 4006 4848 Website: www.vtb.com.ua Website: www.france.vtb.com E-mail: [email protected]
VTB Bank (Deutschland) AG VTB Bank (Belarus) Closed joint-stock company Address: Walter-Kolb-Strasse 13, D-60594 CJSC VTB Bank (Belarus) Frankfurt-am-Main, Germany Address: ulitsa K. Tsetkin 51, Minsk 220004, Belarus Telephone: (4969) 216 8216 Telephone: +375 (17) 306-26-36 Fax: (4969) 216 8389 Fax: +375 (17) 306-26-37 Website: www.vtb.de E-mail: [email protected] E-mail: [email protected] Website: http://vtb-bank.by 13. Contact information
VTB Bank (Armenia) Closed Joint-Stock Company Branch of JSC VTB Bank in Shanghai (China) 115 VTB Bank (Armenia) CJSC Address: Unit 01A, 02 and 03, Level 11, Plaza 66 Address: ulitsa Nalbandyana 46, Yerevan, Republic of Phase 1, 1266 Nanjing Road West in Shanghai, China Armenia 375010 Telephone: (8621) 6136 6236 Telephone: (37410) 58 04 51 Branch of JSC VTB Bank in New Delhi (India) Fax: (37410) 56 55 78 Address: Mezzanine floor, Taj Mahal Hotel, Number Website: www.vtb.am, www.asb.am one, Mansingh Road, New Delhi, 110011 E-mail: [email protected] Telephone: (9111) 6622 1000 Joint Stock Company VTB Bank (Georgia) Representative office of JSC VTB Bank JSC VTB Bank (Georgia) in the Republic of Kazakhstan Address: ulitsa G. Chanturiya 14, Tbilisi, 0102 Address: prospect Dostyk 188, Almaty, Kazakhstan Georgia 050051 Telephone: (995 32) 50 55 05 Telephone: +7 (727) 259-75-60 Fax: (995 32) 99 91 39, 95 60 85 Fax: +7 (727)) 259-75-60 Website: www.vtb.com.ge E-mail: [email protected] E-mail: [email protected] Representative office of JSC VTB Bank Banks and financial companies in Asia and Africa in the Republic of Kyrgyzstan Address: prospekt Manasa 55, Bishkek, Kyrgyzstan Banco VTB Africa S.A. .. 720017 Address: Rua da Missao, 22, Luanda, Angola Telephone: (+996775) 98-33-08 Telephone: (244) 222 395 889 Fax: (+996775) 98-33-08 Fax: (244) 222 395 297 E-mail: [email protected] VTB Capital (Namibia) (Proprietary)) Limited Address: Windhoek, Namibia, CIH HOUSE, Ground Floor, P.O. Box 99290 Telephone: (264) 61 304 588, Fax: (264) 61 304 282
Branches and representative offices abroad
Representative office of JSC VTB Bank in Italy Address: Piazzale Principessa Clotilde, 8 – 20121, Milan, Italy Telephone: (+3902) 2901 3278 Fax: (3902) 2906 0007 E-mail: [email protected]
Representative office of JSC VTB Bank in China Address: 18BC, CITIC Bldg., 19, Jianguomenwai dajie, Beijing, China, 100004 Telephone: (+8610) 8526 2800 Fax: (8610) 8526 2810 E-mail: [email protected]
2007
From opportunities to achievements Annual Report Report Annual
Annual Report 2007